Section 41 says how credit enters the books: the taxpayer takes it, self-assessed, in its return, and it is credited to the electronic credit ledger. If the supplier has not paid the tax on the supply, the credit must be reversed with interest — and can be taken again when the supplier pays.
Key points
- Under section 41(1) of the CGST Act, 2017 a registered person avails eligible input tax credit, as self-assessed, in its return, and it is credited to its electronic credit ledger.
- Under section 41(2), credit on supplies whose tax the supplier has not paid must be reversed with interest; under the proviso it may be re-availed once the supplier pays.
- Rule 37A requires reversal where the supplier has not filed its GSTR-3B for the period by 30 September following the end of the financial year; the recipient reverses by 30 November.
- Before 01.10.2022 the section allowed credit only "on a provisional basis" pending matching under section 42 — a scheme never operated.
HistoryProvisional credit (2017–2022)— Credit was "provisional" until matched under section 42; the Finance Act, 2022 made it final.
As enacted, section 41 allowed credit "on a provisional basis" and restricted its use to self-assessed output tax, pending matching under section 42. Matching was never operated. The Finance Act, 2022 substituted the present section from 01.10.2022 (Notification 18/2022-Central Tax); the original text is in the notes below the statute.
The provisions
41(1)–(2)Availment; reversal where the supplier has not paid
Statutory text
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to avail the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited to his electronic credit ledger.
(2) The credit of input tax availed by a registered person under sub-section (1) in respect of such supplies of goods or services or both, the tax payable whereon has not been paid by the supplier, shall be reversed along with applicable interest, by the said person in such manner as may be prescribed:
Provided that where the said supplier makes payment of the tax payable in respect of the aforesaid supplies, the said registered person may re-avail the amount of credit reversed by him in such manner as may be prescribed.]
* Enforced w.e.f. 22nd June, 2017.
1. Substituted (w.e.f. 1st October, 2022 vide Notification No. 18/2022 - CT) by s. 106 of The Finance Act 2022 (No. 6 of 2022) for
"Section 41. Claim of input tax credit and provisional acceptance thereof.
(1) Every registered person shall, subject to such conditions and restrictions as may be prescribed, be entitled to take the credit of eligible input tax, as self-assessed, in his return and such amount shall be credited on a provisional basis to his electronic credit ledger.
(2) The credit referred to in sub-section (1) shall be utilised only for payment of self-assessed output tax as per the return referred to in the said sub-section."
- Rule 37A, CGST Rules — reversal where the supplier has not paid (Notification 26/2022-Central Tax)
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- What happens to input tax credit if the supplier does not pay the tax?
- The recipient must reverse it with interest under section 41(2) of the CGST Act — under Rule 37A, by 30 November where the supplier has not filed GSTR-3B by 30 September after the year — and may re-avail it once the supplier pays.
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
Sub-section (1) is procedural: entitlement to credit is governed by sections 16 to 21, and the credit availed in the return must also be reflected in the recipient's statement under section 38 (section 16(2)(aa)).
Sub-section (2) is the mechanism for the condition in section 16(2)(c) that the tax must actually have been paid to the Government. Rule 37A, from 26.12.2022, operates it: where an invoice appears in the recipient's GSTR-2B but the supplier has not filed its GSTR-3B for that period by 30 September following the end of the financial year, the recipient reverses the credit by 30 November, with interest under section 50, and may re-avail it after the supplier files its return.