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Detailed Overview of the Invoice Management System (IMS) under GST

The Invoice Management System (IMS) introduced by the GST Network (GSTN) is a significant development aimed at enhancing the accuracy and transparency of the Input Tax Credit (ITC) process for taxpayers. This system allows recipient taxpayers to manage their invoices more effectively by enabling them to accept, reject, or keep invoices pending before claiming ITC. Below is a detailed explanation of how the IMS works and its implications for taxpayers.

1. Introduction of IMS on GST Portal

Starting from October 1st, 2024, the IMS will be available on the GST portal, providing a new communication channel between taxpayers and their suppliers for handling invoice corrections and amendments. This feature will greatly assist taxpayers in matching their records with the invoices issued by their suppliers, ensuring that the correct ITC is availed.

2. Invoice Management System (IMS) Functionalities

The IMS introduces a set of functionalities that allow recipient taxpayers to take specific actions on the invoices received from their suppliers. These actions include:

• Accepting Invoices: Once the recipient accepts an invoice, it becomes part of their GSTR-2B as eligible ITC. The GST on these accepted invoices will auto-populate in the recipient's GSTR-3B as ITC available for that tax period.
• Rejecting Invoices: If an invoice is rejected, it will not be considered for ITC in the recipient’s GSTR-2B. This ensures that any invoice deemed incorrect or suspicious by the recipient is excluded from their ITC claims.
• Keeping Invoices Pending: An invoice can be kept pending if the recipient needs more time to verify its details. Pending invoices will not be included in GSTR-2B or GSTR-3B for the current tax period but will remain on the IMS dashboard for future action. However, these invoices must be acted upon within the timelines prescribed by Section 16(4) of the CGST Act, 2017.

3. Integration with GSTR-2B

IMS is closely integrated with GSTR-2B, which is the auto-drafted ITC statement generated for recipients. The key points regarding this integration are:

• GSTR-2B Generation: Only the invoices accepted by the recipient (or deemed accepted if no action is taken) will be included in GSTR-2B as eligible ITC. Rejected or pending invoices will not be part of the GSTR-2B for that tax period.
• Automatic Updates: If a supplier amends an invoice before filing GSTR-1, the amended invoice will replace the original one on the recipient’s IMS dashboard. This ensures that the recipient always has the most up-to-date information when making decisions on ITC.
• Draft GSTR-2B Availability: A draft GSTR-2B will be made available to the recipient on the 14th of the subsequent month. If any action is taken on an invoice after this date but before the filing of GSTR-3B, the recipient must recompute their GSTR-2B.

4. Flow of Records to IMS

All outward supplies reported by the supplier in GSTR-1, IFF, or GSTR-1A will be reflected in the recipient’s IMS dashboard. The recipient can then take one of the following actions:

• Accept: Accepted records will be included in the ‘ITC Available’ section of GSTR-2B and will auto-populate in GSTR-3B.
• Reject: Rejected records will be listed under the ‘ITC Rejected’ section of GSTR-2B and will not be included in GSTR-3B.
• Pending: Pending records will not be considered in GSTR-2B or GSTR-3B for the current period. These records will remain in the IMS until the recipient accepts or rejects them in a future period.

5. Handling Amended Invoices

The IMS also has provisions for handling amended invoices. If a supplier amends an invoice (through GSTR-1A or similar), the following rules apply:

• Original vs. Amended Records: If both the original and amended records belong to the same GSTR-2B period, only the amended record will be considered for ITC calculation. If they belong to different periods, action must be taken on the original record before any action is taken on the amended one.
• Effect of Rejections: If a recipient rejects an invoice, the supplier’s liability will increase in their subsequent GSTR-3B filing. This ensures that the supplier is held accountable for the rejection.

6. Special Considerations for QRMP Taxpayers

For taxpayers under the Quarterly Return Monthly Payment (QRMP) scheme, IMS functionalities will apply differently:

• Quarterly GSTR-2B: For QRMP taxpayers, GSTR-2B will be generated on a quarterly basis. Invoices saved or filed through IFF will flow to the IMS, and the recipient’s actions will determine their inclusion in the quarterly GSTR-2B.
• No GSTR-2B for M-1 and M-2: GSTR-2B will not be generated for the first two months of a quarter for QRMP taxpayers, ensuring that ITC is only calculated on a quarterly basis.

7. IMS Dashboard Overview

The IMS dashboard provides a summary of all inward records and the actions taken on them by the recipient. The key points to note are:

• Deemed Acceptance: If no action is taken on an invoice, it will be deemed accepted at the time of GSTR-2B generation.
• Sequential GSTR-2B: GSTR-2B will now be generated sequentially, meaning that the GSTR-2B for a return period will only be generated if the previous period’s GSTR-3B has been filed.
• Rejection Implications: If an invoice is rejected, the supplier’s liability will be adjusted in their subsequent GSTR-3B filing, ensuring that the rejection is accounted for.

8. Conclusion

The IMS is a powerful tool for taxpayers, designed to bring greater accuracy and transparency to the GST ITC process. By allowing recipients to actively manage their invoices, the system helps in preventing errors and fraud, ensuring that only genuine invoices are included in ITC claims. This new functionality is expected to reduce disputes, improve compliance, and provide a more reliable system for managing GST invoices.

By understanding and utilizing the IMS, taxpayers can ensure better control over their ITC, leading to more accurate and compliant GST filings.

Disclaimer: All the Information is based on the notification, circular and order issued by the Govt. authority and judgement delivered by the court or the authority information is strictly for educational purposes and on the basis of our best understanding of laws & not binding on anyone.

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