The implementation of the GST Act has marked a great shift in India’s Indirect tax regime. However, to ensure smooth compliance procedures and GST regulations with minimal manual intervention, the GST council has from time to time proposed new key changes. However, a key area of concern that still has been a challenge is the management of invoices and the corresponding availment of ITC. In this regard, the GSTN has introduced a new system that ensures to streamline the invoice management processes—the Invoice Management System (IMS).

In the present article, the detailed workflow of IMS and its impact on the current GST ecosystem have been discussed in detail, along with its usage and implications.

What is Invoice Management System (IMS)?

The IMS system is a new tool designed to help taxpayers manage and review their invoices more efficiently. This system enables organizations to interact with their suppliers about invoice adjustments or amendments while also matching their records to those of their suppliers. With the introduction of IMS, taxpayers can accept, reject, or keep an invoice pending before it becomes part of their ITC claim starting from October 1st, 2024. This system will be available on the GST portal, and its goal is to reduce errors and increase transparency in the invoice processes. The new IMS system has not yet been rolled out, but as per the advisory issued by GSTN, the IMS dashboard will look like:

Since the IMS has become an integral part of the GST compliance procedures, one must understand how to get the most benefit out of it. So below are the key steps mentioned for its efficient usage.

From a documentation standpoint, all tax-paying documents will follow through IMS except the bill of entry and inward RCM.

Steps to Use IMS Functionality

1. Monitoring the IMS dashboard

To review the invoices uploaded by the suppliers, the taxpayers should regularly log in to the GST portal and monitor the IMS dashboard. The invoices uploaded by their supplier will appear into the IMS dashboard of the recipient taxpayer immediately. The timely review of the invoices will help in addressing discrepancies and avoiding issues with respect to the claim of ITC.

 2. Promptly action of the Invoices.

 The actions to accept, reject or keep an invoice pending should be taken promptly within the allowed timeline. For businesses having a large number of invoices, it may be important to designate a team or a responsible individual to monitor and take actions within the IMS on a daily or weekly basis as per the data quantum.

 3. Recompute GSTR to be in case of any changes.

If any action is taken after the generation of draft GSTR 2B on the 14th of each month, the taxpayer must recompute their GSTR 2B. This will ensure that any adjustment made is reflected in their final ITC claims and GSTR 3B filings.

4. Stay informed on amendments in invoices.

The taxpayers should carefully check if any amendments were made by the suppliers, as those amendments may affect the ITC claims. Accordingly, the amendments in the invoices should be tracked and action should be taken accordingly to ensure that GSTR 2B is accurate and up-to-date.

The IMS brings a lot of improvements in managing the invoices under GST. Now, it is important to understand the usage and key prominent features of the IMS dashboard:

Key Features of Invoice Management System (IMS)

 1. Invoice review and actions mechanism

Firstly, the supplier shall submit the sales invoice in their GSTR-1, IFF, or GSTR-1A, and then such invoice would reflect in the IMS dashboard of the recipient. The receiver taxpayer will be able to accept, reject, or maintain pending bills in the GST Portal. This mechanism will provide higher authority over the invoices that would eventually become part of the recipient’s ITC claim in Form GSTR 2B. However, if no action is taken on any invoice, then it will be deemed as accepted and will automatically be considered for the ITC in the recipients GSTR-2B.

2. Impact on GSTR-2B and ITC Claims

The invoices that are rejected or kept as pending by the recipient will not form part of ITC in GSTR 2B; however, those invoices can be considered in the GSTR 2B of future months only after accepting. So, the taxpayer shall be carefully required to act on such pending invoices in the future to ensure that the ITC of such invoices can be claimed within the prescribed time limit of Section 16(4) of the CGST Act 2017.

 3. Amendments and their impact on ITC

If the supplier amends any invoice details before filing GSTR 1, the amended invoice will automatically replace the original invoice on the IMS dashboard of the recipient; however, if an invoice is amended through GSTR 1A, then the corresponding ITC will only reflect in the GSTR 2B of the subsequent month.

The system also allows taxpayers to revisit invoices they have kept pending and take action on them at any future point, subject to compliance deadlines.

4. Deemed Acceptance of Invoices

A unique feature of IMS is the concept of deemed acceptance. If a recipient does not respond to an invoice (accept, reject, or keep it pending), it will be automatically accepted when the GSTR-2B is generated. This provides a level of automation, decreasing compliance obligations while yet allowing taxpayers to thoroughly analyze their invoices.

Further, it is to be noted that for the taxpayers filing returns under the Quarterly Return and Monthly Payment (QRMP) Scheme, the invoices saved or filed through the IFF will flow into the IMS for the recipient’s action and GSTR-2B of these taxpayers will be generated on a quarterly basis rather than monthly.

As the IMS system seems to be a good start to the GSTIN’s efforts for enabling the taxpayers for an efficient management of the invoices on the GST portal itself. It would be very interesting to see how much of an aid to the taxpayers. Nonetheless, as per the GST advisory issued by the GSTN on the IMS dashboards, the following are the variety of benefits that can be anticipated:

Benefits of the Invoice Management System (IMS)

 1. Enhanced control over ITC.

The ability to review the invoices before they become part of the ITC claims in GSTR-2B will ensure the     taxpayers to avoid any errors, discrepancies and fraudulent claims. Also, it will help to ensure that any invoices wrongly issued by the suppliers would not form part of the ITC claim for a specific tax period.

2. Improved Transparency.

Both the suppliers and the recipient would have real-time visibility of the status of their invoice. Suppliers can track whether their invoices have been accepted, rejected, or kept pending by recipients, which reduces the chances of miscommunication and facilitates better tax compliance.

3. Reduce compliance burden.

 While the IMS adds a layer of checks, it also reduces the compliance burden on taxpayers. Invoices that are not acted on will be considered accepted, allowing taxpayers to concentrate on discrepancies or potential difficulties rather than each individual transaction.

Alongside the above-mentioned benefits that the IMS scheme can offer, it is also imperative to note the following possible challenges and considerations that a taxpayer may have to encounter:

Possible Challenges in the Invoice Management System (IMS)

1. Timely Actions Required

Taxpayers must stay vigilant and take timely actions on invoices. Failure to do so could result in incorrect ITC claims or penalties. Especially for large businesses with multiple suppliers, managing this process may require additional resources or automation.

2. Impact of Supplier Amendments

Amendments made by suppliers, particularly after invoices have been accepted, can complicate the ITC claim process. Businesses need to ensure that they have systems in place to track these changes and update their records accordingly.

3. Training and Familiarization

A new system requires a company to invest time and resources to trained the personnel. It is essential that teams responsible for GST compliance are familiar with the workings of IMS to ensure smooth implementation.

Some important clarification

Is IMS optional? Yes, but if no action is taken, it will be deemed to be accepted.

Comments:

 The Invoice Management System is a critical step forward in streamlining GST compliance and improving the accuracy of ITC claims. By providing the taxpayers with greater control over the review and acceptance of invoices, the system reduces the risk of errors, fraud, and disputes with tax authorities. As the system rolls out, taxpayers must be prepared to integrate the IMS into their compliance routines, ensuring that they leverage its full potential while adhering to the prescribed timelines and processes. The IMS will surely be an aid to bring down the tax disputes at the lower level of authorities.

 With the ever-evolving GST landscape, the IMS marks a significant leap towards greater efficiency, transparency, and accuracy in tax administration. Taxpayers that stay proactive and adapt quickly will find themselves in a stronger position to comply with GST regulations while optimizing their ITC claims.