Find
Retention money is part of the invoice value still unpaid. If it stays unpaid after 180 days, the proportionate ITC must be reversed under Rule 37.
GST
Retention money in contracts and Rule 37
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Provisions
Rule 37, CGST Rules 2017; Sec 16(2), third proviso, CGST Act 2017
Analysis
On a ₹11,80,000 bill with 10 percent retained, ₹1,18,000 is unpaid. The ITC on that part, about ₹18,000, is reversed after 180 days and reclaimed when retention is released. Some businesses ask contractors to invoice the retention separately when due, which avoids the reversal. Agree on this in the contract.
Close
- Identify retention amounts in contractor bills.
- Reverse proportionate ITC after 180 days.
- Reclaim on release of retention.
- Consider invoicing retention separately in future contracts.
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