Invoice Management System (IMS): Not mandatory to take any action on invoice in IMS dashboard for GSTR-2B Generation- GSTN advisory. 

GSTN issued very important advisory on the introduction of the Invoice Management System (IMS) for Streamlined Invoice Corrections and ITC Matching on the IMS

On October 14, 2024, the GST Network (GSTN) introduced the Invoice Management System (IMS), a new functionality aimed at improving the accuracy and transparency of the Input Tax Credit (ITC) claims under the Goods and Services Tax (GST) regime. The IMS provides a platform for taxpayers to review and take action on invoices issued by suppliers, facilitating efficient invoice corrections and ITC matching. While it is not mandatory to take action on invoices for GSTR-2B generation, the system offers taxpayers the opportunity to reconcile invoices and ensure that only accurate ITC claims are filed.

Clarification on Invoice Management System (IMS): Invoice Action Not Mandatory for GSTR-2B Generation - GSTN Advisory

Key Points from the Advisory:

• Taxpayers can use the IMS to take action on invoices starting from today.
• The first GSTR-2B generated using IMS data will be for the return period of October 2024 and will be available on 14th November 2024.
• Importantly, it is not mandatory to take action on invoices within the IMS dashboard for GSTR-2B generation. If no action is taken, the system will automatically include the invoices as "Deemed Accepted" in GSTR-2B.

This enhancement offers flexibility to taxpayers while streamlining the ITC claim process through better invoice matching capabilities.

This article delves into the key aspects of the IMS, its operational workflow, and its implications for businesses, especially in terms of compliance, ITC claims, and financial management.

Overview of Invoice Management System (IMS)

The IMS is designed to allow taxpayers to review invoices saved by their suppliers in the GSTR-1, IFF, or GSTR-1A and take appropriate actions before filing their returns. The system aims to:

1. Enhance ITC matching accuracy.
2. Enable communication between recipients and suppliers regarding invoice amendments.
3. Provide transparency in the ITC claiming process by ensuring that only validated invoices are considered for GSTR-2B.

Key Features of IMS

1. Action on Invoices: The IMS allows registered taxpayers to take specific actions on invoices generated by their suppliers. These actions include:
2. Invoice Matching: IMS facilitates the comparison of records from the recipient’s end with the supplier’s data, helping taxpayers avoid mismatches in ITC claims. This feature ensures that ITC is availed only on the basis of genuine and accepted invoices.
3. Not Mandatory for GSTR-2B Generation: Although IMS provides a platform for taking actions on invoices, it is not mandatory for taxpayers to act on all invoices through the IMS for GSTR-2B generation. If no action is taken on an invoice, it is deemed accepted for the purpose of ITC in the GSTR-2B.
4. Communication with Suppliers: The system allows recipients to communicate with their suppliers regarding any discrepancies or required amendments in invoices, fostering greater coordination and reducing errors in ITC claims.
5. Pending Invoices: Invoices marked as "Pending" remain in the system for future action. However, recipients must take necessary action before the limits prescribed under Section 16(4) of the CGST Act, 2017.

• Accept: The invoice is accepted as correct, and the associated ITC will reflect in GSTR-2B.
• Reject: The invoice is rejected, and no ITC will be claimed for that invoice.
• Pending: The invoice is put on hold, and action can be taken in subsequent months.

Workflow of IMS

The IMS workflow is designed to simplify the process of invoice verification and ITC matching. The key steps include:

1. Supplier Invoice Upload: Once a supplier uploads their invoices in GSTR-1, IFF, or GSTR-1A, the invoices are reflected in the IMS dashboard of the recipient taxpayer.
2. Review and Action by Recipient: The recipient can review these invoices and choose to accept, reject, or keep them pending. These actions can be taken any time before filing GSTR-3B.
3. Deemed Acceptance: If the recipient takes no action on an invoice before GSTR-3B filing, the invoice is considered "Deemed Accepted" and will be included in the GSTR-2B ITC calculation.
4. Amendments by Supplier: In cases where the supplier amends an invoice before filing GSTR-1, the amended invoice replaces the original in the IMS dashboard, regardless of any action taken by the recipient on the original invoice.
5. GSTR-2B Generation: The GSTR-2B for a particular month is generated on the 14th of the following month, based on the recipient\'s actions on invoices in the IMS. However, if no action is taken, the invoices are deemed accepted and included in the GSTR-2B.

ITC Claims and GSTR-2B

The IMS plays a critical role in the generation of GSTR-2B, the monthly auto-drafted statement of eligible ITC for taxpayers. Invoices that are accepted (or deemed accepted) by the recipient will form part of the GSTR-2B and can be claimed as ITC in GSTR-3B. However, rejected or pending invoices will not be considered for ITC in the current period. These invoices will remain in the IMS dashboard and can be acted upon in subsequent periods, but within the statutory limits of Section 16(4) of the CGST Act.

Impact on QRMP Taxpayers

For taxpayers under the Quarterly Return Monthly Payment (QRMP) scheme, invoices saved or filed through the IFF will flow to the IMS. However, the GSTR-2B for QRMP taxpayers will be generated on a quarterly basis, unlike monthly for other taxpayers. This ensures that QRMP taxpayers can also take advantage of the IMS to reconcile invoices and claim accurate ITC.

Key Considerations for Taxpayers

1. Deemed Acceptance of Invoices: If no action is taken on an invoice, it is considered as accepted, making it crucial for taxpayers to review their IMS dashboard regularly to avoid unwanted ITC claims.
2. Recomputation of GSTR-2B: If any action is taken on invoices after the GSTR-2B is generated, taxpayers must recompute the statement before filing GSTR-3B. This ensures that the ITC is claimed accurately.
3. Sequential GSTR-2B Generation: GSTR-2B for a particular period will only be generated after the filing of GSTR-3B for the previous period. This sequential approach prevents overlap or confusion in ITC claims.
4. Records Not Going to IMS: Certain supplies, such as inward supplies under RCM or supplies ineligible for ITC under Section 16(4), will not be reflected in the IMS and will directly populate in GSTR-3B.

Benefits of the IMS

1. Enhanced Transparency: The IMS fosters transparency by allowing recipients to communicate with suppliers and review invoices before claiming ITC.
2. Accurate ITC Claims: By giving taxpayers control over the acceptance or rejection of invoices, the system ensures that only genuine invoices form part of the ITC claim, reducing mismatches and errors.
3. Improved Compliance: The IMS is a facilitative tool that helps taxpayers ensure compliance with GST laws without adding any additional compliance burden.

Amendment of Invoices through GSTR-1A and Impact on ITC Flow in IMS

In cases where a supplier amends any invoice that has been filed in GSTR-1 via GSTR-1A, the amended invoice will also reflect in the recipient taxpayer\'s Invoice Management System (IMS) dashboard. However, the Input Tax Credit (ITC) corresponding to such amendments will only be reflected in the GSTR-2B of the recipient, generated for the subsequent month.

Availing Pending Invoices: Time Limits Under Section 16(4) of the CGST Act, 2017

Invoices that are kept pending by the recipient taxpayer within the Invoice Management System (IMS) can be addressed and availed at any point in the future. However, such action must be taken before the time limits specified under Section 16(4) of the CGST Act, 2017. This section prescribes the deadline for claiming Input Tax Credit (ITC), which is up to the due date of filing the GSTR-3B for the month of September following the end of the financial year to which the invoice pertains, or the date of filing the relevant annual return, whichever is earlier. Taxpayers must ensure compliance with these deadlines to avoid forfeiting their right to claim ITC on such pending invoices.

Visibility of Invoices in IMS for Suppliers and Recipients

All invoices or records reported or saved by the supplier taxpayer in GSTR-1, IFF, GST-5, or GSTR-6 will automatically appear in the Invoice Management System (IMS) dashboard of the recipient taxpayer. The recipient can take necessary actions, such as accepting, rejecting, or keeping the invoices pending. Additionally, suppliers will have visibility into the actions taken by their recipients on the invoices within the IMS. This transparency allows suppliers to track the status of their invoices and make any necessary amendments if required.

GSTR-2B Generation and Actions on Invoices

At the time of GSTR-2B generation, only the filed invoices or records by the supplier will be considered for the computation of Input Tax Credit (ITC). A draft GSTR-2B will be made available to the recipient on the 14th of the subsequent month based on the current cut-off dates and actions taken by the recipient. The recipient taxpayer remains free to accept, reject, or keep invoices pending even after the draft GSTR-2B is generated, up until the filing of GSTR-3B. If any action is taken after the 14th of the month, the recipient must recompute their GSTR-2B. However, no further actions can be taken on the invoices after GSTR-3B is filed for that month. Additionally, GSTR-2B for the following month will not be generated until the current GSTR-3B is filed.

No Compliance Burden Due to Deemed Acceptance

The Invoice Management System (IMS) is designed to ease the process for taxpayers without adding any additional compliance burden. If no action is taken by the recipient taxpayer on an invoice, these records will be treated as Deemed Accepted during the GSTR-2B generation process. Taxpayer intervention is only required when an invoice needs to be explicitly rejected or marked as pending. This functionality ensures smooth operations while allowing taxpayers the flexibility to manage their invoices efficiently without mandatory actions for every record.

Supplies Excluded from IMS and Directly Populated in GSTR-3B

Certain supplies will bypass the Invoice Management System (IMS) and be directly populated in the taxpayer’s GSTR-3B. These include Inward Reverse Charge Mechanism (RCM) supplies, where the supplier has reported them in Table 4B of IFF, GSTR-1, or GSTR-1A, as well as supplies where Input Tax Credit (ITC) is ineligible due to the limitations under Section 16(4) of the CGST Act or the Place of Supply (POS) rule. These exceptions simplify the process by excluding such transactions from the IMS dashboard.

Flow of Records to IMS and GSTR-2B

Records will be visible in the Invoice Management System (IMS) dashboard as soon as the supplier saves them in the relevant forms, such as GSTR-1, IFF, or GSTR-1A. The recipient can then take action on these records within the IMS. However, these records will only be included in the recipient\'s GSTR-2B after the supplier has fully filed their return in the respective forms. This ensures proper reflection of transactions in both the IMS and GSTR-2B systems.

Transition of Records Post GSTR-3B Filing

Once the GSTR-3B is filed, all records categorized as accepted, deemed accepted, or rejected will be removed from the Invoice Management System (IMS) dashboard. This transition helps maintain a clear and updated dashboard for taxpayers, ensuring that only the records requiring further action remain visible. Consequently, the system allows recipients to focus on pending invoices while streamlining the overall invoice management process.

Management of Pending Records in IMS Dashboard

Pending records in the Invoice Management System (IMS) dashboard will remain accessible to taxpayers even after the filing of their respective GSTR-3B. This feature allows taxpayers to take action on these pending records in future months, either by accepting or rejecting them as necessary. By retaining pending records within the dashboard, the IMS facilitates ongoing invoice management, ensuring that taxpayers can address any outstanding invoices at their convenience while maintaining compliance with GST regulations.

Action Requirements for Original and Amended Records

In the Invoice Management System (IMS), it is mandatory for taxpayers to take action on the original record and file the corresponding GSTR-3B before addressing any amended records that are filed through GSTR-1A or GSTR-1. This requirement is crucial when the original and amended records pertain to different GSTR-2B return periods. If both records belong to the same period\'s GSTR-2B, only the amended record will be considered for the Input Tax Credit (ITC) calculation for that specific period. This process ensures accurate tracking and compliance with GST regulations while streamlining the reconciliation of invoice discrepancies.

Sequential Generation of GSTR-2B

The generation of GSTR-2B will now follow a sequential process, meaning that the system will produce the GSTR-2B for a given return period only after the GSTR-3B for the preceding return period has been filed. This new procedure aims to enhance the accuracy and reliability of the input tax credit mechanism by ensuring that all relevant transactions and adjustments are accounted for before generating the subsequent GSTR-2B. Taxpayers must be mindful of this requirement to maintain compliance and facilitate a smoother reconciliation process in their GST filings.

Impact of Rejected Invoices on Supplier Liability in GSTR-3B

The liability of the supplier will experience an increase in GSTR-3B for the subsequent tax period concerning invoices or records that have been rejected by the recipient in the Invoice Management System (IMS). This adjustment applies to several specific transactions, including: (a) original credit notes that the recipient has rejected; 

(b) upward amendments of credit notes that are rejected by the recipient, regardless of the action taken on the original credit note; 

(c) downward amendments of credit notes that are rejected by the recipient if the original credit note was also rejected; and 

(d) downward amendments of invoices or debit notes that are rejected by the recipient, provided that the original invoice or debit note was accepted and the corresponding GSTR-3B has been filed. 

These provisions ensure that rejected transactions are accurately reflected in the supplier\'s tax liabilities, thereby maintaining the integrity of the GST framework.

Conclusion

The introduction of the Invoice Management System (IMS) is a significant step toward streamlining the ITC matching process and reducing errors in GST returns. By allowing taxpayers to review and take action on invoices in real-time, the IMS ensures that only verified invoices are considered for ITC claims. While the system is not mandatory for GSTR-2B generation, it provides a useful tool for taxpayers to ensure accurate ITC claims and maintain compliance with GST regulations. Taxpayers are encouraged to familiarize themselves with the IMS and incorporate it into their regular GST return filing process for improved financial and tax management.

Attention - Advisory on IMS

Oct 14th, 2024

Invoice Management System (IMS) is made available to taxpayers from Today, 14th Oct, 2024. The new system shall facilitate taxpayers in matching their records/invoices vis a vis issued by their suppliers for availing the correct Input Tax Credit (ITC). Taxpayers can make use of this system to take action on the invoices reflecting on IMS from 14th Oct, 2024. The first GSTR-2B would be generated for the return period Oct’24 on 14thNovember, 2024 considering action taken on Invoice Management System. It may be noted that it is not mandatory to take action on invoices in IMS dashboard for GSTR-2B generation.

ThankingYou,
Team GSTN

GSTN issued very important advisory on the introduction of the Invoice Management System (IMS) for Streamlined Invoice Corrections and ITC Matching on the IMS

Not mandatory to take action on invoice in IMS dashboard for GSTR-2B Generation. 

The GSTN issued a very Important detailed Advisory no. 517 dated September 03, 2024 on the introduction of the Invoice Management System (IMS) for Streamlined Invoice Corrections and ITC Matching on the IMS.

To enable taxpayers to efficiently address invoice corrections/amendments with their suppliers through the portal, a new communication process is being brought at portal. This will also facilitate taxpayer in matching of their records/invoices vis a vis issued by their suppliers for availing the correct Input Tax Credit (ITC). GSTN is in the process of developing a new functionality called Invoice Management System (IMS) which will allow the recipient taxpayers to either accept or reject an invoice or to keep it pending in the system, which can be availed later.

2. This facility shall be available to the taxpayer from 1st October onwards on the GST portal.

The said functionality would be a major enhancement in the ITC ecosystem of GST. Now, only the accepted invoices by the recipients would become part of their GSTR-2B as their eligible ITC. Therefore IMS will provide the taxpayers an opportunity to review the genuineness and authenticity of the received invoices. Once the suppliers save any invoice in GSTR 1 / IFF / 1A /the same invoice would be reflected in the IMS dashboard of the recipient.

3. The invoices reflect in the IMS dashboard The recipient can accept or reject an invoice or can simply keep it pending in the system. These actions can be taken from the time of saving the records in GSTR 1 / IFF / 1A by the supplier taxpayer till the recipient taxpayer files his/her corresponding GSTR-3B. If recipient doesn’t take any action on an invoice in IMS then it will be deemed accepted and will move to GSTR-2B as an accepted invoice. In case, the supplier amends the details of a saved invoices in the GSTR-1 before filling the GSTR-1, in such cases the amended invoice will replace the original invoice in IMS, irrespective of the action taken by the recipient on the original invoice.

4. In case supplier has amended any invoice filed in GSTR-1 through GSTR-1A then same will also flow to IMS, however, ITC corresponding to the same will flow in GSTR-2B of the recipient, generated for the subsequent month only. The invoices which would be kept pending can be availed by taxpayers at any future point of time but not later than the limits prescribed by Section 16(4) of the CGST Act, 2017. All the invoices/ records reported or saved by the supplier taxpayer in their GSTR-1 or IFF or GST-5 or GSTR-6 will be available in the IMS dashboard of the recipient taxpayer for taking the actions. Supplier will also be able to see, what action his recipient has taken on invoices in IMS.

5. Further, at the time of generation of GSTR-2B only the filed invoices/records by the supplier, will be considered for the computation of ITC. Based on the current cut-off dates and action taken by the recipient, a draft GSTR-2B will be made available to recipient on 14th of the subsequent month as currently being generated. However, the recipient will be free to take actions of accept/reject or keep pending even after generation of GSTR-2B till the filing of GSTR-3B. If recipient taxpayers have taken an action on any invoice after 14th of the month, then he would be required to recompute their GSTR-2B. However, they will not be able to take any action after filing of GSTR-3B for the same month. It may be noted that till GSTR-3B is filed by the taxpayer, GSTR-2B for subsequent month will not be generated.

6. On the basis of action taken by the taxpayer, invoices/records can be categorized as mentioned below :

i. No action taken: These are the invoices/records where no action has been taken by the recipient these will be treated as deemed accepted at the time of GSTR-2B generation;

ii. Accepted: There are the accepted records and will be part of GSTR-2B generation;

iii. Rejected: These records will not be considered for GSTR-2B generation;

iv. Pending: These records will not be considered for GSTR-2B generation for the month, same will be carried forward in IMS itself for further action in subsequent months.

This functionality is a facilitation for the taxpayers and will not add any compliance burden on the taxpayers as No Action records shall be considered as Deemed Accepted and the taxpayer’s intervention will only be required in case a record need to be Rejected or kept Pending.

QRMP Taxpayers:

The records/invoices saved or filed through IFF by a QRMP taxpayer will flow to IMS for the recipient, and will become part of GSTR-2B, as per action taken by the recipient in IMS on the same. The GSTR2B of the recipient will be generated monthly, unless the recipient is a QRMP taxpayer. It may be noted that GSTR-2B will not be generated for Month M-1 and M-2 for QRMP taxpayer. GSTR-2B for a QRMP taxpayer will be generated on Quarterly basis only.

Flow of IMS:

All the outward supplies reported in the GSTR 1 / IFF / 1A shall populate in the IMS of recipients for taking the actions.

1. Accept -Accepted records will become part of ‘ITC Available’ section of respective GSTR 2B. GST on accepted records will auto-populate in GSTR 3B as eligible ITC.

2. Reject -Rejected records will become part of ‘ITC Rejected’ section of respective GSTR 2B. ITC of rejected records will not auto-populate in GSTR 3B.

3. Pending -Pending records will not become part of GSTR 2B and GSTR 3B. Such records will remain on IMS dashboard till the time same is accepted or rejected. ‘Pending’ action shall not be allowed in following scenarios:

a. Original Credit note

b. Upward amendment of the credit note irrespective of the action taken by recipient on the original credit note

c. Downward amendment of the credit-note if original credit note was rejected by recipient,

d. Downward amendment of Invoice/ Debit note where original Invoice/ Debit note was accepted by recipient and respective GSTR 3B has also been filed.

Key points on IMS:

1. Deemed accepted: At the time of GSTR 2B generation, a record will be considered as ‘Deemed Accepted’ if no action is taken on that record in IMS.

2. It is mandatory to recompute GSTR 2B from IMS dashboard in case of any change in action already taken on concerned records or any action is taken after 14th of the month i.e. date of generation of Draft GSTR-2B.

3. Following supplies will not go to IMS and will be directly populated in the GSTR 3B -

a. Inward RCM supplies where supplier has reported in the Table 4B of IFF / GSTR 1 or GSTR 1A and

b. supplies where ITC is not eligible due to section 16(4) of CGST Act or on account of POS rule.

4. Records will flow to IMS dashboard at the time of saving of record by supplier in respective form and recipient can take action on such record in IMS. However, such records will be populated in the GSTR 2B after filling of return in GSTR-1/IFF/1A by the supplier.

5. All the accepted/ deemed accepted/ rejected records will move out of IMS dashboard after filing of respective GSTR 3B.

6. Pending records will remain on IMS dashboard and these records can be accepted or rejected in future months.

7. It is mandatory to take action on original record and file the respective GSTR 3B before taking action on amended record (amended through GSTR-1A/GSTR-1) when original and amended record belongs to 2 different GSTR 2B return period. If both the records belong to same period’s 2B, only amended record will be considered for ITC calculation of GSTR 2B.

8. Any change made in a record/invoice before filing GSTR-1/1A/IFF by the supplier will reset the record’s status on recipient’s IMS dashboard.

9. 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.

10. The liability of supplier will be increased in GSTR 3B for the subsequent tax period, for the invoices/records which have been rejected by the recipient in the IMS for the following transactions

a. Original Credit note rejected by the recipient

b. Upward amendment of the credit note rejected by the recipient irrespective of the action taken by recipient on the original credit note

c. Downward amendment of the credit note rejected by the recipient if original credit note was rejected by him,

d. Downward amendment of Invoice/ Debit note rejected by the recipient where original Invoice/ Debit note was accepted by him and respective GSTR 3B has also been filed.