The Institute of Chartered Accountants of India announced that its practical recommendations on the Invoice Management System (IMS) have been accepted through Government advisories, resulting in important workflow improvements. A key issue flagged was that rejection of a credit note by a recipient—often because input tax credit (ITC) had not been originally availed—was automatically increasing the supplier’s tax liability or reversing recipient ITC, leading to inequitable outcomes. Accepting this concern, the Government introduced a revised IMS workflow allowing recipients to accept a credit note while responding “No” to the question on ITC reduction. This ensures the credit note is properly recorded without increasing the supplier’s liability or forcing ITC reversal. Additionally, the suggestion to introduce a “Remarks” option has been implemented, enabling recipients to record reasons for rejection or pending status. These changes improve transparency, reduce mismatches, and make GST credit note reconciliation more equitable and taxpayer-friendly.
Institute of Chartered Accountants of India
ICAI’s Suggestions on IMS accepted in Government Advisories
| No. | ICAI Suggestion | Status in Government Advisory |
| 1. | Prevention of Auto-Increase in Supplier Liability
Suggestion It was highlighted that rejecting a Credit Note (because ITC wasn’t availed originally) unfairly increased the supplier’s liability. A mechanism was suggested to specify why a Credit Note is rejected to stop the auto-increase. Various scenarios which would necessitate rejection of Credit Notes were presented before the GSTN to make a case for restricting the blanket auto increase of the supplier’s liability or the auto reversal of recipient ITC. |
Accepted (Via New Workflow)
The Government accepted that rejection of Credit Note by the recipient can unfairly increase the liability of the supplier. Building upon the primary suggestion of the ICAI to enable the recipient to give the reason for rejection, the Government introduced a new workflow whereby the Recipient could Accept the Credit Note and answer “No” to the question “Whether ITC need to be reduced?” This ensured the recording of the Credit Note without reducing the recipient’s ITC or increasing the supplier’s liability. |
| 2. | Option for Remarks
Suggestion Adding a “Remarks” column to record reasons for rejection or pending actions to make matching seamless. |
Accepted
The system now includes an option to provide a remark by the recipient taxpayers at the time of taking Reject or Pending action. |
