New GST Invoice Management System (IMS): A Guide for Taxpayers

What is the Invoice Management System (IMS)?

IMS is a new technique duly designed by GSTN to enhance the efficiency of reconciliation process under GST System. Firstly, A supplier is required to upload the invoices in GSTR-1, GSTR-1A, or GSTR-IFF (Invoice Furnishing Facility), Then the recipients can navigate these invoices on the IMS dashboard for his action. Based on the understanding of supplier, the supplier can take the following action:

1.Accept the Invoice: The Supplier can confirm the invoice if the same is acceptable/matching with books of accounts.

2. Reject the Invoice: If discrepancies are there, the recipient can reject the invoice.

3. Keep the Invoice Pending: If an Invoice is not related to supplier or further investigation is required, the recipient can leave the invoice as pending.

It is pertinent to note that the above action is the key step for generation of GSTR-2B and corresponding availment of Input Tax Credit (ITC). These actions play a crucial role in shaping the recipient’s GSTR-2B, which is generated by the 14th of the following month. The ITC reflected in GSTR-2B is then auto-populated in the recipient’s GSTR-3B return, ensuring that the correct tax liability and credits are reflected.

Challenges During the Initial Phase of IMS

In the initial phase of the Invoice Matching System (IMS), suppliers are facing many challenges due to a lack of knowledge or limitations in the company’s accounting system. Currently, suppliers sometimes wrongly accept an invoice that should have been rejected. Conversely, suppliers sometimes wrongly reject an invoice that should have been accepted. This is causing discrepancies in the GSTR-2B report, which also affects the filing of GSTR-3B.

Whenever a valid invoice is mistakenly rejected by the supplier, you might miss out on claiming the Input Tax Credit (ITC) in GSTR-2B, even though it was eligible to be availed. On the other hand, accepting an incorrect invoice could lead to ineligible ITC being included in GSTR-2B.

To help avoid such problems, the GST Portal has made it possible for users to revisit their decisions on the IMS Portal. So, if you change your mind—for example, from rejecting to accepting an invoice—you can do so any time before filing your GSTR-3B for the relevant tax period. When you revise your decision, please make sure that your revised decision is correctly reflected in the GSTR-3B of the respective month.

Best Practices for Taxpayers

To minimize the risk of errors during the initial phase of IMS, taxpayers should adopt a careful and systematic approach. Here are some best practices to follow:

1.Meticulously Verify Each Invoice: Ensure that all invoices are thoroughly reviewed before accepting, rejecting, or marking them as pending. Discrepancies should be identified and addressed promptly.

2. Reconcile Supplier Data with Internal Accounts: Cross-check supplier information with internal records to prevent discrepancies between the two sets of data.

3. Manually Edit GSTR-3B When Necessary: While the system auto-populates ITC in GSTR-3B, it is important to manually review and correct any inaccuracies before filing. Taxpayers can make manual adjustments to ensure that the final filing is accurate.

Despite the flexibility provided by GSTN to amend actions, errors in the initial stages may still occur. In such cases, manual adjustments in GSTR-3B may be required to ensure accurate reporting and compliance.

Importance of Accurate Filing

The accuracy of GSTR-3B filings is highly necessary, not only for maintaining compliance but also for avoiding potential Tax disputes with authorities. Incorrect claims of ITC or failure to report tax liabilities can result in notices, penalties, or the disallowance of ITC in future. Therefore, taxpayers must use IMS system very carefully and ensure that all actions taken are well-documented and substantiated.

Departmental Advisories & FAQs on IMS

In order to support taxpayers during the implementation of IMS, the GST Department has issued various advisories and FAQs. These resources provide valuable guidance on using IMS effectively and the same can be accessed via the following links:

 Conclusion

The new Invoice Management System (IMS) is a step in the right direction to help improve GST compliance and better invoice reconciliation. It is designed to make matching invoices easier and more accurate. In the beginning, there might be a few bumps along the way, but if taxpayers stay careful and organized, they can avoid most problems.

As a Chartered Accountant, my advice is to start using IMS seriously and proactively. Its adoption is likely to become mandatory in near future. Just keep a close eye on things, especially in these early days, and you’ll be in a good position to handle any mismatch issues that come up later stage.

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