Introduction
The goods and services tax department have been continuously revolutionizing the manner to manage invoicing and the compliances in business. With this new change or compliance of having an effective Invoice Management System (IMS) nowadays has become essential to avoid fraud and fake invoicing to take fake input tax credits.
Previously with effect from 2017(I am specifically talking about GST), many organizations were handling invoices manually by using excel or software provided by various application service providers like FreshBooks, Zoho Invoice, Xero and many more.
However, with effect from October 1, 2024, our government have launched a new IMS functionality on the GST Portal, aiming to simplify the process of correcting invoices, reconciling records, and claiming Input Tax Credit.
Hence my dear readers, in this article I am going to discuss with you all the importance of IMS within the GST framework, its features, and the ways it will benefit your business
IMS and its Role in ITC under GST
We all know the reconciliation process under GST is very time consuming and sometimes complex, even client is required to bear high interest or penalty in case of mistake
The new IMS will allow taxpayers to accept, reject, or hold invoices for future review, significantly simplifying the reconciliation process while enhancing accuracy. If no action is taken, invoices will be “deemed accepted” by default.
This system ensures businesses can cross-check their records against suppliers’ invoices, ensuring that the correct ITC is claimed. This is a key development, as ITC plays a crucial role in reducing tax liability. IMS is set to transform how businesses meet their GST obligations, streamlining the entire process while reducing errors, saving time, and improving resource management.
You might be thinking how the IMS Works?
Let’s discuss this in a Step-by-Step manner with short questions.
What is current situation?
Currently, taxpayers claim ITC in their GSTR-3B statements based on a static GSTR-2B statement which is reflected on the portal. With the new IMS, which have started in this month i.e. October 2024, the process will become more dynamic.
How it will work?
Once a supplier saves an invoice in GSTR-1, GSTR-1A, or IFF, it will get reflected in the recipient’s IMS dashboard. So, before generating the GSTR-2B, only the invoices filed by suppliers will be considered for ITC, though it will make process easy but comment below do you think it will make ITR provisions more harsh?
What will be the power with recipients?
Recipients can take the following actions, each with distinct outcomes:
– Accept: The invoice will be included in the ‘ITC available’ section of GSTR-2B.
– Reject: Rejected invoices will be excluded from GSTR-2B, requiring follow-up with suppliers for corrections.
– Pending: Pending invoices will remain in the dashboard until action is taken or the deadline passes i.e. 11th of next month
What is no action is taken by Recipient?
If no action is taken by the recipient, then the invoices will be automatically considered as accepted and they will be added to GSTR-2B of the recipient.
Exclusions and Timing in IMS
Some transactions, like ICEGATE documents and Reverse Charge Mechanism records, Documents relating to GSTR-5 relating to non-resident taxable person and GSTR-6 relating to Input Service Distributors to provide the details of their distributed input tax credit & inward supplies, Documents requiring ITC reversal under Rule 37A, Time-barred documents as per Section 16(4) of the CGST Act as well as Ineligible documents due to Place of Supply (POS) exceptions are excluded from IMS. Additionally, the invoices will appear in the IMS portal as soon as they are saved by the supplier, allowing real-time management.
Note: Indian Customs Electronic Gateway (ICEGATE) is the national portal of Indian Customs of Central Board of Indirect Taxes and Customs (CBIC) that provides e-filing services to the Trade, Cargo Carriers and other Trading Partners electronically, in short it is for import and export
The IMS system offers users two views:
One for recipient View which lets taxpayers view all invoices saved or filed by suppliers and other one is for supplier where, taxpayers can track recipient actions based on the invoices they issued to them.
What are the amendments and special rules which are set for quarterly taxpayers?
Amendments that are made by the suppliers will automatically be reflected in the IMS portal, regardless of prior actions taken by the recipient. For quarterly taxpayers, it was decided by the government that GSTR-2B will not be generated for the first two months of the quarter, instead, it will be compiled for the entire quarter and made available in the following month, that means 13th day of month succeeding the end of every quarter.
Note: I must bring to your notice that if your turnover during the preceding financial year was up to Rs. 5 Crore or if you are registered during the current financial year and expect your aggregate turnover to be up to Rs. 5 Crores then you are eligible for quarterly return
What are the key business impacts of IMS?
The introduction of IMS brings about major changes to business processes concerning GST compliance and invoicing, like enhanced GST compliance as the IMS will likely lead to greater scrutiny of current GST and invoicing processes. While acting on each invoice is currently optional, it may become mandatory in the future, requiring businesses to proactively adapt
Next one is improving the communication between Supplier and the recipient by allowing them to address discrepancies in real time, IMS will improve communication, speed up the resolution of issues, and ensure proper and timely ITC claims, and for compliance with this, the businesses will be required to develop internal capabilities for verifying invoices of suppliers to avoid non-compliance and the risk of additional tax liabilities due to incorrect invoices.
Next is it made it easy to track the transactions of suppliers helping to manage cash flow and remain compliant with GST rules, along with that the suppliers will be required to frequently review the rejected transactions to take corrective action pre-hand, thereby preventing supply chain disruptions and maintaining strong relationships with their customers.
Conclusion
The introduction of the Invoice Management System is a significant leap forward in GST compliance. By automating and streamlining the invoicing process, IMS not only enhances the accuracy of ITC claims but also positions businesses to manage their GST responsibilities more effectively.
For businesses, adopting a robust IMS isn’t only about meeting legal obligations, it’s about building a foundation for long-term growth and success in a competitive marketplace. By embracing this change, companies can unlock the potential for smoother operations, improved financial management, and sustainable growth.
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