The Goods and Services Tax Network has introduced the Invoice Management System (IMS) on the GST portal, effective October 1, 2024. This new feature is designed to assist GST-registered taxpayers in claiming input tax credit (ITC) with fewer disputes. With IMS, invoice data entered by sellers in a designated form on the GST portal will automatically appear in the buyer’s IMS. Using this information, buyers can choose to accept, reject, or leave the invoice pending. Once a buyer accepts an invoice, it will then be included in their GSTR-2B as an eligible input tax credit.

Despite its good intentions, this system faced several challenges. In an advisory dated November 12, 2024, GSTN recognized that, since the Invoice Management System (IMS) was a new feature on the GST portal, there might be instances during the initial rollout where the recipient (buyer) could mistakenly act on the IMS-be it by accepting, rejecting, or leaving pending-regarding an invoice or record. In such situations, taxpayers would be unable to claim the correct amount of Input Tax Credit (ITC) until the error was resolved. To address this issue and assist GST-registered taxpayers in claiming their ITC smoothly and accurately, GSTN has proposed a solution.

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GSTN said in the advisory: “..During this initial phase of implementation of IMS, the taxpayers are advised that in such cases, where due to any inadvertent mistake in the action taken on the IMS, if incorrect details of ITC/ liability are auto-populated in GSTR-3B on the portal, the taxpayer before filing their GSTR-3B return, may edit such wrongly populated ITC/liability in their GSTR-3B, to correctly avail ITC or pay correct tax liability based on the factual position as per the documents/records available with him.”

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Experts urge GST-registered taxpayers to take prompt action on the data displayed on the IMS. “While taxpayers have the option to accept or reject the invoices, it is recommended that they review the information displayed on the IMS and take prompt action, as failure to do so may be considered as deemed acceptance of the invoices,” says Brijesh Kothary, Partner at Khaitan & Co, a law firm.

“Done right, this could mean near-perfect accuracy for your Input Tax Credit (ITC) claims, but one wrong click, and your financial landscape might start resembling a minefield of incorrect ITC figures. Errors during the initial phase of IMS could lead to unwelcome surprises, like the wrong ITC being auto-populated in your GSTR-3B. So, while IMS aims to simplify processes and improve transparency, it also demands precision and vigilance,” says Siddharth Chandrashekhar, Advocate (Bombay High Court) & Panel Counsel for CBIC & CBDT.

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In its advisory, GSTN underscored the interconnected nature of the input tax credit claims process. It further stressed that the IMS system shouldn’t be viewed as an additional compliance requirement; rather, it aims to assist taxpayers in accurately claiming their ITC. This system is designed to minimize instances of invoice data mismatches and to foster increased transparency.

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GSTN said: “Invoice Management System (IMS) is an optional facility introduced from October 2024 on GST Portal, on which the invoices/records saved/furnished by the supplier in GSTR-1/1A/IFF, can be accepted, rejected or kept pending by recipients .Based on the action taken by the recipient on the IMS, system will generate the GSTR 2B of the recipient on 14th of subsequent month. The Taxpayer can accept/reject/keep pending the invoice/record on IMS after due verification from his accounts. The ITC for the rejected record will not be available to the recipient in the GSTR 2B. Further, the liability and input tax credit is being auto -populated in GSTR 3B of the taxpayer on the portal based on his liability declared in GSTR 1/1A and input tax credit made available in his GSTR 2B. However, the taxpayer can presently edit the said auto-populated details in GSTR 3B before filing the same.”

Experts say IMS has a much broader impact than the e-invoicing feature. “IMS is designed as a taxpayer-friendly tool aimed at reducing disputes related to ITC mismatches. Unlike e-invoicing, this feature is being rolled out for all taxpayers simultaneously, regardless of their turnover, and is expected to have a broad impact across the taxpayer community,” says Kothary.

GSTN said in a tutorial available on its website: “Once the suppliers save any invoice in GSTR 1 / IFF / 1A /the same invoice would be reflected in the IMS dashboard of the recipient. A sample screenshot of the same is provided below:

How a user error can derail the process of claiming input tax credit

GSTN, in its advisory, emphasised that the GSTR-2B data for recipients is generated based on the actions carried out within the IMS system,, “any mistake in the action taken by the recipient on the IMS could result in incorrect details of available/eligible input tax credit to the recipient being shown in his GSTR-2B, which will also be auto-populated in his GSTR-3B on the portal.”

GSTN said that in such cases the recipient can change the action on the IMS in respect of an invoice/record (for example, from rejected to accepted or vice versa) and can recompute his GSTR-2B at any time till the filing of GSTR-3B for the corresponding tax period, so that correct ITC is auto-populated in his GSTR-3B.

“The advisory dated 12th November 2024 acknowledges that IMS is a new feature, and recipients may make errors during its initial phase of implementation. These errors can be corrected when filing Form GSTR-3B. However, the advisory issued by GSTN is intended solely to raise awareness about the functionality and may not have a legal backing. As such, it remains to be seen whether this advisory can help taxpayers who make genuine mistakes in accepting or rejecting invoices, debit notes, or credit notes issued by suppliers, in defending themselves against any notices from tax authorities,” says Kothary from Khaitan & Co.

Chartered Accountant Hardik Kakadiya, President, Chartered Accountants Association Surat (CAAS) says, “It is great that GSTN thinks of the word “mistake” in Invoice Management System (IMS), especially the one which is auto-populated in GSTR-3B. This gives us hope that some day the wisdom will prevail, and judgments of High Courts will be honoured to allow rectification of GSTR-3B.”

When asked whether taxpayers should use IMS or not Chandrashekhar said, “If you’re ready to embrace technology and perform real-time reconciliations with aplomb, IMS could be your ally. It promises better visibility and control over your ITC claims, which, in a perfect world, translates to lower chances of tax disputes and ITC disallowances. However, if you’re not quite ready to handle the responsibility of clicking ‘accept’ or ‘reject’ with unwavering certainty-or if your suppliers have a penchant for frequent amendments-opting in might feel more like a walk on a tightrope.”