GST ITC Reversal and Reclaim Under 180-Day Rule in Tally Prime

One of the most critical — and often overlooked — GST compliance requirements is the 180-day payment rule for Input Tax Credit (ITC). Businesses that claim ITC on purchase invoices but fail to pay the supplier within 180 days must reverse the claimed credit, along with interest at 18% per annum.

This guide explains how to identify affected invoices in Tally Prime, record the reversal, and reclaim ITC after payment.

1. Understanding Section 16(2) — The 180-Day Rule

Section 16(2)(b) and 16(2)(c) of the CGST Act impose two conditions for ITC eligibility:

• The taxpayer must receive the goods or services.
• The taxpayer must pay the invoice value (inclusive of GST) to the supplier within 180 days from the invoice date.

If the 180-day deadline passes without full payment, the ITC claimed on that invoice must be added back as output tax liability in GSTR-3B, along with 18% p.a. interest calculated from the date ITC was claimed.

2. Identifying Overdue Invoices in Tally Prime

To find purchase invoices approaching or past the 180-day mark:

1. Go to Gateway of Tally → Display → Statements of Accounts → Outstandings → Creditors.
2. Filter by Due Days > 150 to get a list of invoices nearing the deadline.
3. Export the outstanding list to Excel and identify invoices with 0 or partial payments beyond 180 days.

3. Recording the ITC Reversal in Tally

Record a Journal Voucher (F7) in the month the 180-day rule is triggered:

This reversal is reported in GSTR-3B Table 4(B)(2) — ITC reversed for inputs where Section 16(2) conditions are not satisfied.

4. Reclaiming ITC After Making the Payment

Once you pay the supplier (even after 180 days), you are entitled to reclaim the reversed ITC:

1. Record the payment voucher in Tally with the full invoice amount settled.
2. In the same GSTR-3B return period, record a Journal Voucher to reverse the earlier reversal:
   Debit: Input CGST / SGST / IGST (reclaim)
   Credit: Output CGST / SGST / IGST Payable (reduce liability)
3. Report the reclaim in GSTR-3B Table 4(A)(5) — ITC reclaimed that was previously reversed.