Key points
- No GSTR-1 from the supplier = no ITC. The bill must be furnished by the supplier and communicated to you in GSTR-2B (section 16(2)(aa), rule 36(4)).[1][2]
- Tax must actually be paid by the supplier, in cash or through its own credit (section 16(2)(c)).[1]
- Rule 37A: if the supplier filed GSTR-1 but not the matching GSTR-3B by 30 September after the year, reverse that ITC in a GSTR-3B by 30 November; otherwise pay it with interest. Re-claim when the supplier files.[3]
- Blocked credits under section 17(5) apply whatever the supplier does, for example goods for personal use and free samples.[4]
- Time limit: ITC for a year's bills can't be taken after 30 November following that year (section 16(4)).[1]
Three ways a supplier puts your credit at risk
| Supplier did | Effect on you | Rule |
|---|---|---|
| Did not file GSTR-1/IFF for your bill | Bill not in your 2B; you cannot claim | Section 16(2)(aa), rule 36(4)[1][2] |
| Filed GSTR-1, not GSTR-3B for that period | Credit shows in 2B; but if 3B is still not filed by 30 Sep after the year, you reverse by 30 Nov | Rule 37A, section 16(2)(c)[3][1] |
| Registration cancelled or inactive | New bills can't be valid tax invoices for ITC; e-invoices are rejected | Section 16(2)(a); IRP check[1][5] |
Rule 37A in plain words
Rule 37A covers credit you have already claimed in GSTR-3B on a bill your supplier reported in GSTR-1, GSTR-1A or IFF. If the supplier has not filed GSTR-3B for that period by 30 September following the end of the year in which you claimed the credit, you must reverse it in a GSTR-3B filed on or before 30 November of that year. If you don't, you pay it with interest under section 50. When the supplier files its GSTR-3B later, you can claim the credit again.[3]
For credit claimed during FY 2025-26, the dates are: supplier's 3B due by 30 September 2026, your reversal by 30 November 2026. That is six weeks from the date of this post, so now is the time to check suppliers.
Credits that are blocked anyway
Section 17(5) lists credits you cannot take even when the supplier files everything.[4] The ones distributors meet most:
- Motor vehicles for carrying up to 13 people, and their insurance and repair, except in specified businesses.
- Food and beverages, outdoor catering, beauty treatment, health services, life and health insurance, except where used for the same kind of outward supply or where the law requires them for employees.
- Club and fitness memberships, and travel benefits such as leave travel for employees.
- Goods or services for construction of immovable property on your own account (other than plant and machinery).
- Goods for personal use; goods lost, stolen, destroyed, written off, or given away as gifts or free samples.
The 57th GST Council (8 October 2026) recommended removing the block on several of these, including outdoor catering, health and life insurance, free samples and goods written off on expiry of shelf life. Until that is notified, the blocks stand.[6]
A supplier compliance scorecard
Score your top suppliers by purchase value every month. Four measures are enough:
| Measure | How to check | Good | Act when |
|---|---|---|---|
| On time in 2B | Share of the supplier's bills in your 2B for the month they were billed | 95% or more | Below 80% |
| Match rate | Bills that match on number, date, value and tax | 98% or more | Below 90% |
| Return filing | Supplier's GSTR-1 and GSTR-3B filing status on the GST portal's taxpayer search | All filed | Any 3B missing for 2+ months |
| GSTIN status | Active on the portal | Active | Suspended or cancelled |
Grade suppliers A to D. Pay D-grade suppliers only for the value of bills already in your 2B and filed in their 3B, or hold the GST portion until they file, if your agreement allows it. Moving purchases to compliant suppliers is often cheaper than chasing reversals later.
Worked example, in rupees
Mahalaxmi Electricals, Pune (sample firm) checks its top five suppliers on 17 October 2026 for FY 2025-26 purchases:
| Supplier | ITC claimed FY 2025-26 | GSTR-1 | GSTR-3B by 30-09-2026 | Action by 30-11-2026 |
|---|---|---|---|---|
| S1 | ₹6,40,000 | Filed | Filed | None |
| S2 | ₹3,10,000 | Filed | Filed | None |
| S3 | ₹1,85,000 | Filed | Jan–Mar 2026 not filed (₹48,000 of ITC) | Reverse ₹48,000 |
| S4 | ₹92,000 | Filed | Filed | None |
| S5 | ₹36,000 | Not filed for 2 bills (₹9,000) | n/a | Never claimed; nothing to reverse |
Mahalaxmi reverses ₹48,000 in its October 2026 GSTR-3B (filed by 20 November), inside the 30 November limit, and re-claims it if Supplier S3 files later.[3] The ₹9,000 on S5's bills was never in 2B, so it was rightly never claimed; it can be claimed only if S5 files and the bills reach 2B before the section 16(4) deadline of 30 November 2026 for FY 2025-26 bills.[1]
How Moharbill helps
- The free GSTR-2B tool shows which of a supplier's bills are missing from 2B.
- The free GSTIN check shows whether a supplier's GSTIN is active.
- Purchase bills are kept with ITC, and your CA has a free seat to review reversals. See GST returns.
- Coming in v1.1: supplier follow-ups from 2B matching inside the app.
Frequently asked questions
Can I claim ITC if my supplier has not filed GSTR-1?
No. Under section 16(2)(aa) and rule 36(4), ITC is available only on bills the supplier has furnished and that are communicated to you in GSTR-2B.
What is rule 37A?
If you claimed ITC on a bill the supplier reported in GSTR-1, but the supplier has not filed the matching GSTR-3B by 30 September after the year, you must reverse that ITC by 30 November of that year, or pay it with interest. You can re-claim it after the supplier files.
What is the rule 37A deadline for FY 2025-26?
Suppliers' GSTR-3B by 30 September 2026; your reversal in a GSTR-3B filed on or before 30 November 2026.
What is blocked ITC under section 17(5)?
Credits you cannot claim even with a valid invoice, such as certain motor vehicles, food and beverages, club memberships, construction of immovable property on own account, goods for personal use, and goods given as gifts or free samples.
How do I check if a supplier files GST returns?
Use the taxpayer search on the GST portal, which shows the GSTIN status and return filing status, and check whether the supplier's bills reach your GSTR-2B each month.
Sources
All read on 17 Oct 2026.
- CGST Act 2017, section 16 (16(2)(a), (aa), (c); 16(4)), CBIC. taxinformation.cbic.gov.in
- CGST Rules 2017, rule 36(4), CBIC. taxinformation.cbic.gov.in
- CGST Rules 2017, rule 37A, CBIC. taxinformation.cbic.gov.in
- CGST Act 2017, section 17(5), CBIC. taxinformation.cbic.gov.in
- NIC e-invoice portal, Resolution for Common Errors (3029: GSTIN not active). einvoice1.gst.gov.in
- PIB, "Recommendations of the 57th Meeting of the GST Council", 8 Oct 2026, para B1.9. gstcouncil.gov.in
Written by the Moharbill team
We build GST billing for distributors at Hexa Secure Labs and write these guides from the rules we code into the product. Spotted something out of date? Tell us and we will fix it within two working days.