invoice management system ims under gst

The Goods and Services Tax Network is constantly streamlining its GST portal and introducing new features to simplify compliance and auditing for taxpayers. The latest is the Invoice Management System (IMS), which will go live on 1st October 2024. It aims to help significantly manage the process of ITC claims. 

This article discusses the key features and benefits of the Invoice Management System and explains how it works. Stay with us. 

Latest Updates

9th September 2024
In the 54th GST Council Meeting, the Finance Minister acknowledged the enhancements to the existing GST return architecture. As stated in the advisory issued on 3rd September, the recipient taxpayers, for the purpose of availing Input Tax Credit (ITC), will be provided options to either accept, reject, or keep the invoice pending. Though, as of the moment, the facility stands optional, this process is expected to reduce errors, improve reconciliation, and reduce notices issued on account of ITC mismatch in the returns.*

*The same would be given effect through the relevant circulars/ notifications.

What is the Invoice Management System (IMS) Under GST? 

The Invoice Management System, or IMS, is a new feature within the GST portal that will allow recipient taxpayers to accept, reject, or keep invoices filed by their supplier taxpayers pending. Mismatches between invoices filed by suppliers and returns submitted by recipients are a significant issue taxpayers face when claiming input tax credits. 

Once rolled out, the IMS will allow registered recipients to match their records with invoices issued by suppliers in their GSTR-1. This will streamline recipient taxpayers' Input Tax Credit (ITC) availing process.  

Date of Implementation of Invoice Management System Under GST

The new IMS feature will be implemented within the GST portal from 1st October 2024. 

Watch the video to under the complete workflow of IMS:

How Does the Invoice Management System Work? 

One of the significant problems that taxpayers face in GST compliance is availing input tax credit (ITC). The IMS functionality is expected to resolve some of the critical bottlenecks in that process. 

1. First, suppliers submit and save their GSTR-1 by the 11th of every month or Invoice Furnishing Facility (IFF) or amend the submitted invoice using GSTR-1A in the GST portal. GSTR-1A can be submitted until the time a taxpayer files the GST return (GSTR-3B) for the relevant tax period. 
2. Once the supplier saves and submits the recorded invoice, it will appear in the recipient taxpayer's IMS dashboard and eventually in the GSTR-2B.
3. The IMS dashboard includes the supplier's GSTIN, trade name, invoice number, and type. 
4. The recipient taxpayers will be given three options: ACCEPT, REJECT, or PENDING, which must be acted upon within the time the supplier uploads the invoice in their GSTR1/IFF/1A and the recipient files their GSTR-3B by the 20th of the corresponding months. To take action on an invoice after the 14th of every month, recipients will need to recompute the draft GSTR-2B.
5. If the recipient chooses to ACCEPT, the accepted invoice becomes part of the recipient's auto-generated ITC statement or GSTR-2B, which is generated on the 14th of every month.
6. Suppose the recipient decides to REJECT an invoice saved by the supplier. In that case, it does not become part of the recipient's ITC report or GSTR-2B. 
7. When the recipient decides to keep an invoice PENDING, the portal does not count it as part of GSTR-2B for that month. IMS carries it forward to next month.  
8. Suppose a recipient does not take action on an invoice. In that case, the system considers it 'deemed accepted' and automatically adds it to the recipient's GSTR-2B. 
9. If the supplier amends an accepted or pending invoice, the amended invoice will replace the old invoice. The recipient must act on the newly updated invoice. 
10. When suppliers make amendments in GSTR-1 through a GSTR-1A, the updated information flows through IMS to the recipient's GSTR-2 B, but only in the subsequent month.
11. Taxpayers can avail of PENDING invoices in any future months subject to a maximum limit as per Section 16(4) of the CGST Act, 2017.

Key Features of Invoice Management System (IMS)

• Communication functionality: The invoice management system is a communication functionality within the GST portal that connects suppliers and recipients through invoice documentation and a single dashboard interface. 
• Single-window to process auto-generated GSTR-2B: Recipient taxpayers with multiple inward suppliers can manage all invoices submitted by all suppliers and auto-generate GSTR-2B with minimal interventions. The taxpayer must select either ACCEPT, REJECT or PENDING to finalise auto-generated ITR reporting. 
• Zero compliance burden: Any new functionality or feature within the GST portal often worries taxpayers about the latest compliance workload. However, IMS will not create any additional compliance burden. If a recipient fails to respond to an invoice, it will be automatically considered 'deemed accepted'. IMS will simplify ITC reporting by streamlining the inward invoice management process. 
• Summary view of inward invoices and actions: The IMS dashboard offers a summary view of all invoices and actions taken for each invoice. This can help management decision-making and auditing processes. 
• Suppliers can now easily amend submitted invoices: The new functionality also makes it easier for suppliers to amend saved invoices.  

Invoice Management System (IMS) Dashboard

The new system has not yet been rolled out, but as per the advisory issued by GSTN , the Invoice Management System dashboard looks like - 

How Taxpayers Manage Invoices and Claim Input Tax Credit

Currently, taxpayers need to follow multiple steps to manage inward invoices, reconcile them, and claim ITC based on reconciled invoices. These steps are: 

1. Collecting records from purchase register: A recipient taxpayer must first collect all the records in their purchase register.  
2. Download GSTR-2A: Once suppliers file their GSTR-1 with all the supporting documents, the details of the inward invoices appear in the recipient taxpayer's GSTR-2A form. 
3. Download GSTR-2B: The portal generates GSTR-2B on the 14th of every month. Taxpayers also need to get this auto-generated ITC statement as part of their ITC claim. 
4. Reconciling GSTR-2A and purchase register: Once a taxpayer receives a pre-filled GSTR-2A form for a month, they compare the GSTR-2A with each entry in the purchase register records. 
5. Reconciling the taxpayer's GSTR-1 with the sales register helps the taxpayer verify the accuracy of outward supplies. 
6. Reconciling GSTR-3B and GSTR-1 - This step helps to calculate GST liability accurately. 
7. Matching GSTR-2B with GSTR-3B helps ensure proper utilisation of ITC while discharging the GST liability.

Large businesses also require reconciling e-way bills and invoices to avoid discrepancies and future compliance issues. 

Benefits of Invoice Management System

When rolled out, IMS is expected to offer multiple benefits to small and large businesses. 

• Precision audit: IMS will allow auditors to check each invoice thoroughly without requiring them to access multiple interfaces, helping to avoid audit errors. 
• Minimal error in GSTR-3B: The system offers a summary view of all inward invoices. So, taxpayers do not need to bother about missing out on any invoice before filing GSTR-3B. 
• Less complication with pending invoices: Pending invoices get carried forward to upcoming tax periods without affecting GSTR-2B and 3B. 
• Available for QRMP taxpayers: The new invoice management system will be helpful for small businesses and is also available for QRMP taxpayers. However, it will not automatically populate GSTR-2B for months 1 and 2 in a quarter. For them, GSTR-2B will be generated quarterly. 

Key Points of the New Invoice Management System (IMS)

• It will go online on 1st October 2024. 
• The system will simplify the process of assessing every inward invoice and take individual action on them. 
• IMS will not increase any compliance burden, as the system will automatically consider invoices 'deemed accepted' if a taxpayer fails to take action. 
• This will improve audit efficiency in large companies and simplify the ITC claiming process for smaller businesses. 
• The interface is simple to follow and requires no accounting or auditing expertise.