GST Portal Introduces New IMS Feature to Fix Errors in Invoices
The Goods and Services Tax Network (GSTN) has launched the Invoice Management System (IMS) on the GST portal, starting October 1, 2024. This innovative feature aims to assist GST-registered taxpayers in declaring input tax credits (ITC) with reduced disputes. Under the IMS, invoice data submitted by sellers will automatically populate in the buyer's IMS on the GST portal. Buyers can then decide to accept, decline, or keep invoices pending. Accepted invoices will be reflected in the buyer's GSTR-2B as ITC.
However, the implementation of this system has some difficulties. In an advisory released on November 12, 2024, GSTN admitted that as a new segment, there may be intricacies during its initial execution where buyers could inadvertently act incorrectly—whether in accepting, declining, or keeping invoices pending. Such errors could prevent taxpayers from claiming the accurate amount of ITC until resolved. To mitigate this issue, GSTN has suggested a solution for taxpayers.
According to the advisory, during this initial stage of IMS implementation on the GST portal, if taxpayers encounter inaccuracies in their auto-populated ITC or liabilities in GSTR-3B due to mistakes made on IMS, they can edit these details prior to submitting their returns. This allows them to accurately claim GST ITC or pay the correct tax based on their actual records.
Experts are advising GST-registered taxpayers to act promptly on the data shown in IMS. An expert emphasized that while taxpayers can accept or reject invoices, they should carefully examine the information presented and take timely action. Otherwise, failure to act may be interpreted as approval of the invoices.
When utilized correctly, IMS could lead to highly accurate ITC claims. However, a single mistake could complicate financial records with inaccurate ITC amounts. Siddharth Chandrashekhar, an advocate at Bombay High Court and panel counsel for CBIC and CBDT, noted that while IMS is intended to streamline processes and enhance transparency, it requires careful use of the platform by the users.
Experts said that IMS is an optional mechanism developed for better management of invoices and related documents. It offers improved organization and tracking while reducing data mismatches. Taxpayers with high transaction volumes are advised to use IMS for its efficiency benefits. However, smaller businesses may need to weigh the advantages against their current practices.
GSTN highlighted that claiming ITC involves interconnected steps and that IMS should not be seen as an added compliance burden but rather as a tool to assist in accurate claims. The system is structured to reduce invoice data discrepancies and enhance transparency.
The advisory further clarified that once suppliers save invoices in GSTR-1/IFF/1A, these will be visible on the recipient's IMS dashboard. The actions taken by recipients will dictate how their GSTR-2B is generated each month.
GSTN also warned that any errors made by recipients during this initial phase could lead to incorrect ITC details being displayed in GSTR-2B and subsequently auto-populated into GSTR-3B. Taxpayers can adjust their actions on IMS until they file GSTR-3B for the relevant tax period to ensure correct ITC figures.
While the advisory aims to facilitate a smooth transition to a fully operational system by allowing manual edits to ITC claims, it remains uncertain how effectively it will protect taxpayers who make genuine errors when processing invoices. The advisory reflects a commitment from the government to improve business operations and support taxpayers in adapting seamlessly to this new system.
Experts indicate that the Invoice Management System (IMS) has a more extensive influence compared to the e-invoicing feature. IMS is crafted as a user-friendly tool proposed for minimizing disputes associated with ITC discrepancies. Unlike e-invoicing, which is typically rolled out selectively, IMS will be available to all taxpayers at once, irrespective of their turnover, thereby broadening its influence among the taxpayers.
GSTN has provided a tutorial on its website explaining that once suppliers enter an invoice in GSTR-1, IFF, or 1A, this invoice will automatically show up on the recipient's IMS dashboard.
Potential User Errors and Their Consequences
GSTN’s advisory stresses that the data for GSTR-2B is produced relied on actions taken within the IMS. Any mistakes made by recipients in their actions on IMS could lead to incorrect ITC details being displayed in their GSTR-2B, which will subsequently auto-populate in their GSTR-3B.
In this scenario, recipients have the option to modify their actions regarding an invoice or record within IMS—changing it from decline to approval or vice versa—and can recalculate their GSTR-2B until they file GSTR-3B for the relevant tax period. This ensures that accurate ITC figures are reflected in their GSTR-3B.
The advisory dated November 12, 2024, admitted that as IMS is newly introduced, recipients may commit errors when it is in early stage. These mistakes can be rectified when submitting Form GSTR-3B. However, it should be noted that this advisory primarily serves to inform users about IMS functionality and does not carry legal weight. Therefore, it remains uncertain whether this guidance will assist taxpayers in justifying genuine errors made when accepting or rejecting invoices and related documents from suppliers against potential notices from tax authorities, noted the experts.
The advisory aims to ensure a hassle-free transition to a fully functional system by providing flexibility for taxpayers during the early implementation stage. By allowing manual adjustments to ITC claims, it seeks to reduce the risk of unintentional mistakes. This strategy highlights the government's dedication to improving business operations and supporting taxpayers in adapting effectively to the new system, according to the experts.
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CA professionals expressed appreciation for GSTN's acknowledgment of potential "mistakes" within the IMS framework, particularly concerning auto-populated data in GSTR-3B. He remains hopeful that this recognition will lead to greater acceptance of High Court rulings allowing corrections in GSTR-3B.
Answering the question- should taxpayers adopt IMS? Chandrashekhar stated that if businesses are willing to leverage technology and conduct real-time reconciliations confidently, IMS could be beneficial. It offers improved visibility and control over ITC claims, potentially reducing tax arguments and disallowances of their ITC. However, for those hesitant about consistently making accurate decisions when accepting or rejecting invoices—or if suppliers frequently amend their records—using IMS might seem risky.