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Invoice Management System: The New Update to Simplify ITC Claims

  • 10 September, 2024
  • 8 Mins

Highlights

  • The Invoice Management System will be launched on 1st October 2024.
  • IMS dashboard will allow recipient taxpayers to act on the invoices and include them accordingly in their ITC claims.
  • The recipient can accept, reject, or mark the invoices pending in the new invoice management system dashboard.

The GST Network has consistently tried to streamline the GST return filing process for taxpayers and simplify compliance and auditing for them. One significant part of GST audits is claiming Input Tax Credits (ITC). In order to simplify this process as well, GSTN’s latest initiative is to introduce an Invoice Management System (IMS) for taxpayers who receive a supply of goods and services. This system is all set to launch on October 1, 2024.

With this IMS dashboard, recipient taxpayers will find all invoices saved by supplier taxpayers in their GSTR-1 or GSTR-1A. They will then have an option to reconcile the details of all these invoices with their purchase register. Once reconciled, they can accept, reject, or put the invoice on pending. Each action will have a subsequent effect on their ITC claims and will reflect differently in their GSTR-2B statement.

The introduction of this new system is bound to bring a significant change in the ITC claim process. Let us understand the process in detail and how the invoice management system will simplify it.

What is the Invoice Management System (IMS)?

Invoice Management System or IMS is a new GSTN portal update where the recipient taxpayers will find all the invoices saved by their supplier/suppliers in their GSTR-1 within a single IMS dashboard. This automated invoice management will save a lot of time and effort that goes into reconciling supplier invoices with purchase details. Moreover, with auto population of invoice details from GSTR-1 to this portal, there is also no scope of discrepancies.

Additionally, since the IMS dashboard also allows recipients to take actions like accept, reject, or put the invoice on pending, it will simplify the entire GST compliance system for them. Moreover, with proper reconciliation, recipients can file accurate ITC claims.

The Invoice Management System will come into effect on October 1, 2024.

How Will the Invoice Management System Work?

The IMS dashboard aims to streamline the ITC claim process for taxpayers. Here’s how the process will flow in this system:

1. Suppliers prepare their GSTR-1 or IFF (QRMP) before the 11th of every month. This return has information on all their outward supplies for the month. They can amend the invoices in GSTR-1 and the fresh invoice will automatically replace the original one in the IMS dashboard irrespective of the action that recipient has taken for it. They can also amend the invoices submitted in GSTR-1 through a separate return GSTR-1A. All these actions are completed on the GST portal itself. However, the amendment of invoices in GSTR-1 through GSTR-1A is possible only until the supplier does not file GSTR-3B for the relevant tax period.

2. All these invoices saved by the supplier in GSTR-1 will automatically reflect in the recipient’s IMS dashboard (Refer to the screenshot of the IMS dashboard below). In case the supplier amends an invoice from GSTR-1 through GSTR-1A for the same, the fresh invoice will flow to the IMS dashboard. However, the ITC for that invoice will be a part of the recipient’s GSTR-2B for the subsequent month only.

Invoice Management

3. Once all invoices reflect on the IMS dashboard, the recipient will have three options. They can choose between the options of accept, reject, or pending. The recipient can act on an invoice between the time of supplier uploading details in their GSTR-1 until filing his GSTR-3B. Generally, it is advisable to take relevant action on any invoice before 14th of the subsequent month- date that recipient receive their draft GSTR-2B.

However, if the recipient needs to make an amendment in their action later after 14th, they will need to recompute their GSTR-2B before filing his GSTR-3B returns. After that, they cannot take any further action on the invoices for the same month. It is also important to note that only the invoices filed by the supplier will account for the computation of ITC at the time of generating GSTR-2B. Additionally, a recipient cannot prepare GSTR-2B for the subsequent month if they have not filed their GSTR-3B for the last month.

This is the screenshot of the IMS dashboard showing a summary of all supplies and actions taken on them.

Invoice management

Actions Available on the IMS Dashboard for Each Invoice

1. Accept: The first option that recipients have is to accept an invoice. The accepted invoices will be available in the recipient’s GSTR-2B return in the “ITC available” section. GST in these invoices will further auto-populate in GSTR-3B for the month.

2. Reject: Next option is to reject the invoice. The rejected invoices will not be a part of GSTR-2B computation and will appear in the “ITC Rejected” section. The supplier will be notified of this and can choose to amend the invoice for further action by the recipient. If he decided to amend the invoice before filing GSTR-1, the status of that invoice will reset in the IMS dashboard. Now, the recipient must act on the amended invoice.

Rejection of certain invoices can increase the tax liability for the supplier for the subsequent months. Such invoices are as follows:

– Original credit note
– Upward amendment of the credit note
– Downward credit note (if the recipient had also rejected the original note)
– Downward amendment of invoice/debit note (if the recipient had accepted the original one and filed the GSTR-3B for the same)

3. Pending: Another option that the recipient can choose to opt for is to put the invoice on pending. The pending invoices will not move to GSTR-2B or GSTR-3B of the current month. Instead, they will remain on the IMS dashboard for the recipient to act on in subsequent months. While the recipient can act on these invoices for multiple months, they must do so before the deadline prescribed by Section 16(4) of the CGST Act, 2017.

The pending action is not available for the following transactions:

– Original credit note
– Upward amendment of the credit note (irrespective of the action that recipient took on the original credit note)
– Downward amendment of the credit note (if the recipient had rejected the original credit note)
– Downward amendment of the invoice/debit note (if the recipient has already accepted the original ones and filed the relevant GSTR-3B for the same)

4. No Action: In case the recipient chooses not to take any action on invoices, no action invoices are deemed accepted in the IMS dashboard. Such invoices become a part of the GSTR-2B and then also considered for ITC in GSTR-3B.

Invoice Management System Dashboard

Supplies Not Included in IMS Dashboard

There are some supplies that do not reflect in IMS dashboard but sent directly to GSTR-2B & 3B. These are:

Inward RCM: Inward RCM supplies reported by the supplier in Table 4B of GSTR-1/ 1A/ or IFF.
Ineligible as per POS: These are supplies where ITC is not eligible as per “Place of Supply” rules.
Ineligible as per Section 16(4) of CGST Act: These are the supplies where the cutoff to claim ITC has passed as per section 16(4) of the CGST Act.

Invoice Management System Infographic

What is Different for QRMP Taxpayers?

Given that QRMP taxpayers do not get GSTR-2B on a monthly basis, some things will be different for them on the IMS dashboard. In case the supplier is a QRMP taxpayer, the supplies that they save in their IFF statement will flow automatically into the IMS dashboard. They will also become a part of the recipient’s GSTR-2B according to the action taken by the recipients.

However, in case the recipient is a QRMP taxpayer, GSTR-2B for them will not be available for months M-1 AND M-2 of the quarter. Instead, their GSTR-2B is drafted for the entire quarter in the month M-3.

ITC Claim Process: Current vs Invoice Management System

The ITC claim process, at present, is more manual compared to what the Invoice Management System proposes to offer. Here is how they differ:

Current ITC Claim Process

GSTR-1: Supplier saves the relevant supplies for the month in GSTR-1.
GSTR-2A: The saved supplies are auto-populated to GSTR-2A, which is then available to the recipient taxpayer.
Reconciliation and Rectification: The recipient taxpayer reconciles the data in GSTR-2B with his own purchase register and makes rectifications, if needed.
GSTR-1 Filing: Once reconciled, the supplier files GSTR-1 and all supplies mentioned there are then necessarily auto-populated in GSTR-2B &3B of the month on 14th.
Pending Invoices: In the current ITC claim process, there is no possible method to track the pending invoices.

What is Different with the Invoice Management System?

  • GSTR-1: Supplier saves all relevant supplies for the month in GSTR-1.
  • GSTR-2A and IMS: All these supplies then automatically flow in the IMS system and are available to the recipient.
  • Accepted/ Deemed Accepted: Invoices accepted or left with no action (deemed accepted) by the supplier are auto-populated into GSTR-2B & 3B for the month.
  • Rejected: Rejected invoices are not a part the GSTR-2B or 3B for the month.
  • Pending: Invoices left on pending by the recipient remain in the IMS system for the subsequent months. These are not available for ITC claim the present month.
  • Amendments: If the supplier makes any change in the supplies in GSTR-1 before filing it, these changes automatically replace the original invoices in the IMS dashboard, irrespective of the action the recipient took on the original invoice.
  • GSTR-1A: In case the supplier files amendments for GSTR-1 through GSTR-1A, these amendments also replace the original invoices in the IMS dashboard. However, the ITC for these is available for claim only in the subsequent month.
  • GSTR-2B: If the recipient wants to change their action on an invoice after the draft GSTR-2B is ready on 14th, they will have to recompute their GSTR-2B before 20th to file the GSTR-3B for that month.
  • GSTR-3B: GSTR-3B will automatically fetch all the details from the recomputed GSTR-2B.

FAQs

Q1 What is the Invoice Management System (IMS)?

IMS is a new GSTN feature prepared to launch on October 1, 2024. It expects to simplify the process of managing invoices and claiming Input Tax Credit claims by providing a unified dashboard where recipient taxpayers can view and reconcile all their inward supplies.

Q2 How will IMS help with ITC claims?

IMS allows taxpayers to accept, reject, or mark invoices as pending. Any action taken on invoice affects a recipient’s ITC claims, which are auto-populated in GSTR-2B & 3B for the month.

Q3 When can recipients act on invoices on IMS?

Recipients are free to act on invoices from when they are saved in GSTR-1 by the supplier to when they file their GSTR-3B for the month.

Q4 What happens when the recipient takes no action on an invoice?

In case of no action, invoices are automatically deemed accepted and auto-populated in GSTR-2B & 3B of the month.

Q5 Can recipients amend their actions on an invoice?

Yes. The recipients can amend their actions on an invoice until they do not file their GSTR-3B for the month. After that, one can not make any changes to the invoices for that tax period.

Q6 Can the recipients mark all types of invoices pending?

No, it is not possible to mark some invoices pending. These include original credit notes, or amendments to credit and debit notes.

Q7 How does IMS differ for QRMP taxpayers?

For QRMP taxpayers, IMS will reflect supplies saved in the IFF (Invoice Furnishing Facility) and will populate GSTR-2B at the end of the quarter. Recipients must manage these differently compared to monthly filers.