Introduction of Invoice Management System (IMS)

This is to inform you about the advisory issued by GSTN regarding the launch of a new ‘Invoice Management System (IMS)’ on the GST portal, effective from October 1, 2024. This system aims to assist taxpayers in reconciling their purchase records (invoices, credit/debit notes) with the documents issued by their suppliers, helping in the formulation of GSTR 2B and the claim of Input Tax Credit (ITC)

Flow of IMS and GSTR-2B generation process

·       All the outward supplies saved/ reported by the supplier in their GSTR-1/ IFF/ GSTR-1A shall populate into IMS dashboard of the recipient, for them to take requisite actions such as accept, reject, or pending in the IMS.

·       Post filing of GSTR-1 by the suppliers, the recipients will have to take the below mentioned actions on IMS:

a)     Accept: Documents accepted will form part of ‘ITC Available’ of GSTR-2B and will auto-populate in GSTR-3B as eligible ITC;

b)     Reject: Documents rejected will form part of ‘ITC Rejected’ section of GSTR-2B and will not auto-populate in GSTR-3B

c)     Pending: Invoices kept as pending will not become part of generated GSTR-2B and GSTR-3B for the month. The same will remain open on the IMS dashboard till the same is accepted or rejected.

However, ‘pending’ action will not be allowed for the below scenarios. The below needs to be either accepted/ rejected in the same month:

                         i)            Original credit note

                       ii)            Upward amendment of credit note - irrespective of action taken by recipient on original credit note

                     iii)            Downward amendment of the credit note - where original credit is rejected by recipient

                      iv)            Downward amendment of invoice/ debit note - where original invoice/ credit note is accepted by recipient and respective GSTR-3B is filed

Note - The liability of the supplier will be increased in GSTR-3B for subsequent period in case the above transactions are rejected by the recipient on IMS

d)     No action taken: Documents (invoices as well as credit and debit notes will be deemed accepted for GSTR-2B generation, where no action is taken by the recipient.

·       Basis the above actions taken, GSTR-2B will be generated on 14^th of the month. Where no action is taken by taxpayers until 14^th, a draft GSTR-2B containing all invoices and credit/ debit notes issued to the respective recipients will be generated.

-          In cases where any of the above actions are made by the recipients post generation of GSTR-2B (as on 14^th of the month), the recipients will have to recompute GSTR-2B for the month.

Key points to be noted:

·       Following invoices will not flow to IMS and will be directly populated in GSTR-3B:

-          inward RCM supplies where supplier has marked the same as applicable to RCM;

-          inward supplies where ITC is not eligible due to POS restrictions or on account of expiry of time limit for credit availment as per Section 16(4)

·       IMS gets populated with documents as soon as any such document is saved by the suppliers in GSTR-1/ IFF.  Where supplier amends the details of saved documents before filling GSTR-1, the amended document will replace the original one in IMS, irrespective of the action taken on the original document by the recipient.

-          Therefore, it is recommended to take actions for document reflecting in IMS only after the due date for filing GSTR-1 by suppliers i.e., after 11^th of the month.

-          Such records will auto flow to GSTR-2B only after GSTR-1/IFF/GSTR-1A is filed by the suppliers.

·       Where any invoice is amended by supplier through GSTR-1A, the same will flow to IMS for the same month. However, corresponding ITC on such amended invoice will flow to GSTR-2B generated for the subsequent month.

·       GSTR 2B will be sequential now. i.e. system will generate GSTR 2B of a return period only if GSTR 3B of previous return period is filed.

Comments

·       The said facility provides an opportunity to the recipient taxpayer to review the transactions reported by their suppliers and enables them to efficiently address document corrections/amendment related issues with their suppliers through GSTN portal.

·       We have listed some of the key considerations which may be noted w.r.t. monthly GST compliances (considering usage of IMS):

-          Reconciliation of IMS dashboard with the purchase register to be done before filing GSTR-3B to ensure all eligible ITC is accounted for and rejections/ discrepancies are resolved.

-          Undertake all necessary actions on documents (invoices and credit notes) before 14^th of the month to the extent possible to avoid recomputing the GSTR-2B again.

-          Rejected invoices will not flow to GSTR-2B and accordingly credit on the same cannot be taken in GSTR-3B. Therefore, in cases where invoices are erroneously rejected, recipients may need to contact their suppliers to amend/ re-issue the invoices. The recipient cannot claim ITC on that invoice unless recipient issues corrected document – however, the possibility of such amendment / correction to be explored as per the provision of GST law.

-          Maintain detail records of actions taken in IMS including reasons for rejections and communication with suppliers for future audits by GST authorities.

 

·       Further, it is also pertinent to note that actions to be taken with respect to credit notes are very crucial from both supplier and recipient standpoint:

-          From Suppliers’ perspective - Where the credit notes are rejected by the recipient, the liability of the supplier will be increased to that extent in GSTR-3B of the subsequent period. Therefore, it is essential for suppliers to maintain detailed records with respect to the original invoices against which such credit notes are issued and also the reason for issuance of such credit notes, to manage queries received from recipients and GST authorities.

-          From Recipients’ perspective – The credit notes populated in IMS cannot be kept ‘pending’ and are required to accepted/ rejected in the same month, else the same will be deemed accepted and auto-flow to GSTR-2B for the month.  Therefore, it is crucial for recipients to review the list of credit notes reflecting in IMS immediately after GSTR-1 is filed by their suppliers, and suitably co-ordinate with them to decide on the actions to be taken, to avoid future queries with respect to additional credit notes reflecting in GSTR-2B against which ITC reversal is not undertaken by the recipients (on such deemed accepted CNs).

Accordingly, where IMS as a reconciliation mechanism is being envisaged, it is important for businesses to effectively communicate to their vendors to provide and make available, proper information with respect to the Credit notes being issued – so that, timely action is taken by recipients in IMS and unwarranted hassle (in terms of rejection which could lead to increase in liability of supplier) could be avoided.

Given the above, it is important for businesses to timely review the records on IMS and transfer relevant invoices to GSTR-2B so as to manage queries (if any) that may emanate in this regard