Rule 37A — supplier's non-payment of tax
Rule 37A requires a recipient to reverse ITC where the supplier declared the invoice in GSTR-1 but did not discharge the tax by filing GSTR-3B for that period.
Rule 37A protects the exchequer where a supplier reports a sale but never files the return that pays the tax. If a supplier files GSTR-1 but not the corresponding GSTR-3B by 30 September following the financial year in which you availed the credit, you must reverse that ITC by 30 November of that same year, and may re-avail it once the supplier subsequently files that GSTR-3B.
Rule 37A closes the gap left by Section 16(2)(c), which makes ITC contingent on the supplier actually paying tax. The trigger is specific: the supplier furnished GSTR-1 (so the invoice reached your GSTR-2B) but did not file the matching GSTR-3B by 30 September following the end of the financial year in which you availed the credit. You then reverse by 30 November of that same year.
This is hard to catch early by hand: the invoice looks perfectly valid in your GSTR-2B all year, and GSTN's own Rule 37A figure — Table 5 of GSTR-2B, "ITC Reversal on account of Rule 37A" — only reaches you in the GSTR-2B for September of the next financial year, weeks before the 30 November deadline. Unlike Rule 37, the fault here is the supplier's, but the reversal burden still falls on you. Re-availment is triggered by the supplier subsequently filing that GSTR-3B — not by proof of payment. Because the trigger depends on the supplier's filing status rather than your own, it is one of the hardest reversals to catch with enough lead time without tracking that status through the year.
The Recoup angle: Recoup flags suppliers who filed GSTR-1 but not GSTR-3B, so at-risk credits surface before the 30 November deadline.