Aijaz Hussain Malik
For close to eight years, the Goods and Services Tax regime in India has struggled with one persistent problem: how to ensure that the Input Tax Credit (ITC) claimed by a buyer actually corresponds to tax genuinely deposited by a seller. Fake invoicing rackets, mismatched returns, and disputed supplies have cost the exchequer heavily and clogged the adjudication machinery with notices and appeals. The Goods and Services Tax Network (GSTN) has now built a functional answer to this problem — the Invoice Management System, or IMS. What began as a facilitative tool in October 2024 has, over the following eighteen months, evolved into a mandatory statutory gateway that decides which invoices a taxpayer may legitimately claim credit on. For tax officers, understanding IMS is no longer optional; it is fast becoming central to how ITC disputes, fraud detection, and compliance monitoring will be conducted going forward.
What Exactly Is IMS?
The Invoice Management System is a facility on the GST portal that sits between a supplier’s outward-supply filing and a recipient’s ITC claim. Every B2B invoice, debit note, credit note, and amendment that a supplier saves or files in GSTR-1, GSTR-1A, or the Invoice Furnishing Facility (IFF) now lands on the recipient’s IMS dashboard before it is allowed to flow into the recipient’s GSTR-2B. The recipient is required to review each record and take one of three actions — Accept, Reject, or keep it Pending. A fourth state, “No Action,” is the default until the taxpayer intervenes. IMS went live in a read-only form on 1 October 2024, with action functionality opening on 14 October 2024. The first IMS-influenced draft GSTR-2B was generated for the October 2024 tax period. What was initially a convenience feature became a statutory requirement after Section 38 of the Central Goods and Services Tax Act, 2017, was substituted through Notification 16/2025-Central Tax dated 17 September 2025, tying ITC eligibility directly to accepted IMS records. The Central Goods and Services Tax (Fourth Amendment) Rules, 2025 — notified vide Notification 18/2025-Central Tax — further codified the procedure and inserted a new Rule 67B governing supplier liability adjustments when a recipient rejects a credit note. From 1 April 2026, IMS became mandatory, with hard blocks placed on ITC claims for invoices that do not reflect as accepted in GSTR-2B.
How the System Works
The workflow follows a fixed sequence:
1. A supplier records an invoice, debit note, or credit note in GSTR-1, GSTR-1A, or IFF.
2. The document instantly appears on the recipient’s IMS dashboard under Services → Returns → Invoice Management System.
3. The recipient may Accept, Reject, or mark the record Pending, either individually or in bulk. Since April 2026, GSTN has also offered an MS Excel-based offline utility, allowing taxpayers with high invoice volumes to download IMS data as JSON, process it offline, and upload their decisions — a facility particularly useful for MSMEs with patchy portal connectivity.
4. On the 14th of the following month, a draft GSTR-2B is generated based on the supplier’s filed records and whatever actions the recipient has taken up to that cut-off.
5. If a recipient takes no action, the record is deemed accepted and flows into GSTR-2B as eligible ITC — placing the onus of verification, not silence, on the taxpayer.
6. A recipient may still act on records after the 14th, right up to the filing of GSTR-3B, but must then click “Recompute GSTR-2B” to regenerate an updated statement.
7. The moment GSTR-3B is filed for a tax period, all IMS actions for that period are frozen.
Two sequencing safeguards, introduced from October 2025, deserve particular attention from officers scrutinising ITC claims. First, GSTR-2B for any period is generated only after GSTR-3B for the prior period has been filed, enforcing strictly sequential compliance. Second, where an original invoice and its later amendment fall in different return periods, the recipient must act on the original and file the corresponding GSTR-3B before any action can be taken on the amended record — closing a loophole that previously allowed double claiming of credit across periods.
From October 2025 onward, specified downward amendments and credit notes can be kept Pending for only one tax period, after which they must be actioned. Taxpayers were also given more precise control: they may now declare the exact ITC actually availed on a credit note and reverse only that proportion, rather than being forced into a blanket reversal — a meaningful correction for cases where ITC was never claimed in the first place. Effective from the October 2025 period, a further module was added covering Bills of Entry for imported goods, including imports through SEZs, bringing customs-linked ITC into the same review architecture.
The Relationship Between IMS and Auto-Populated ITC (GSTR-2B)
This is the crux of the reform. Under the earlier system, GSTR-2B was generated purely mechanically — every invoice a supplier filed simply flowed through as “eligible” ITC, regardless of whether the recipient had actually verified it, received the goods or services, or disputed the transaction. IMS inserts human judgment into that automated pipeline.
Accepted records move into the “ITC Available” section of the recipient’s GSTR-2B and auto-populate as eligible ITC in GSTR3B.
Rejected records move into an “ITC Rejected” section of GSTR2B and do not auto-populate as credit in GSTR-3B at all.
Pending records stay outside GSTR-2B entirely for that period, until actioned or until the statutory time limit for holding them pending expires.
In effect, GSTR-2B is no longer a passive mirror of the supplier’s GSTR-1; it is now a curated statement shaped by the recipient’s own IMS actions. Since April 2026, this relationship has hardened further through what practitioners term the “Zero Mismatch Policy” — GSTR-3B filing is blocked outright where the ITC claimed exceeds what GSTR-2B reflects. IMS therefore functions as the input control, and the zero-mismatch check at GSTR-3B stage as the output control — together closing the gap that fraudulent and negligent ITC claims previously exploited.
Certain categories of records — including those from GSTR-5 and GSTR-6 filers, ICEGATE-linked imports outside the new BoE module, reverse-charge supplies, and invoices ineligible for ITC under Section 17(5) — continue to flow directly into GSTR-2B without needing a dashboard action, since no discretionary acceptance is legally relevant to them.
Benefits — For Taxpayers and for the Department:
For taxpayers, IMS offers real-time visibility into inward supplies before they harden into a return, a documented audit trail of remarks exchanged with suppliers over disputed invoices, and the ability to reject bogus or duplicate invoices before they inflate a credit ledger that later has to be reversed with interest. The optional remarks feature — visible to both parties — has meaningfully improved communication between trading partners, replacing what used to be email threads and phone calls outside the compliance system.
For the Department, and for officers specifically, the gains are structural. IMS creates a documented, time-stamped record of exactly when a recipient accepted, rejected, or sat on an invoice — evidence that is directly relevant in adjudication proceedings involving disputed ITC, fake invoicing chains, or circular trading networks. Because rejection by a recipient now increases the supplier’s own liability in a subsequent GSTR-3B under the new Rule 67B mechanism, IMS creates a self-correcting pressure between trading parties that reduces the volume of disputes that would otherwise land directly on an officer’s desk. The system also lays the groundwork, as GSTN itself has indicated, for AI-assisted anomaly detection and more automated fraud triage in future return cycles.
A Note of Caution :
IMS is not without friction. The “deemed acceptance” default, while designed to prevent GSTR-2B generation from stalling, also means that inattentive taxpayers can end up with ineligible or disputed ITC quietly credited to their account, requiring reversal later — a more complicated remedy than a timely rejection would have been. Genuine taxpayers, particularly small businesses without dedicated compliance staff, may find the discipline of monthly, invoice-level review demanding. Composition taxpayers and Input Service Distributors remain outside its scope, and officers should bear this exclusion in mind while examining ITC claims from such entities.
Conclusion
The Invoice Management System represents the most consequential structural change to India’s ITC framework since GST’s rollout in 2017. By converting GSTR-2B from an automatic pass-through into a recipient-verified statement, and by tying that verification into statutory ITC eligibility under the amended Section 38, GSTN has shifted a meaningful share of first-line verification from the tax administration onto the taxpayers themselves — without diminishing the Department’s ability to scrutinise, and indeed strengthening the evidentiary trail available for it to do so. For officers handling ITC verification, audit, and anti-evasion work, IMS should now be regarded as a primary reference point, not a peripheral portal feature.
(The author Aijaz Hussain Malik (JKAS) is State Taxes Officer, Circle-C, Srinagar. Views expressed are personal.)
