Understanding the Invoice Management System (IMS) Process on the GST Portal

The Goods and Services Tax Network (GSTN) introduced the Invoice Management System (IMS) on October 1, 2024, to enhance the existing reconciliation process within the GST portal. Both tax authorities and indirect tax experts anticipate that this system will streamline Input Tax Credit (ITC) claims for businesses and improve the effectiveness of transaction audits. This article explores the new IMS functionality, detailing its user benefits and guiding taxpayers on its efficient use for ITC claims and compliance.

Key Features of the Invoice Management System

The Invoice Management System (IMS), integrated into the GST portal, offers several essential functionalities designed to simplify user tasks:

• Enhanced Communication: IMS facilitates better interaction between suppliers and recipients. It provides recipients with options to either accept, reject, or keep an invoice pending.
• Instant Invoice Review: Recipients can immediately review invoices once suppliers save or file them in GSTR-1/1A/IFF, allowing prompt action for inclusion in the ITC claim process.
• Unified Operation: Taxpayers can now monitor, verify, and manage most invoices (with few exceptions) from various suppliers through a single dashboard, significantly reducing administrative effort.
• Consolidated Invoice View: IMS presents a filtered summary of all invoices, including their current status and actions taken by the recipient. For instance, rejected invoices can be tracked in the amended invoices section to see if the supplier has made changes.
• Simplified Invoice Amendments: The new system enables suppliers to view rejected invoices in real-time, allowing them to make necessary adjustments during GSTR-1 filing or via GSTR-1A without delays. This accelerates ITC claims for recipients and ensures accurate GSTR-3B tax liability reporting for suppliers.
• Record Reset Option: Users can reset all actions taken on invoices within the GSTR-3B filing due date. This option activates when multiple invoices are selected.
• Bulk Actions: The functionality supports selecting multiple records, either on the current page or across all pages.
• Excel Download: IMS allows taxpayers to download invoice details in an accessible Excel format, facilitating offline verification and cross-referencing of records.

Step-by-Step Process for the Invoice Management System

The GST portal's Invoice Management System assists recipient taxpayers in efficiently managing decisions on each incoming invoice through a unified interface. Let's understand the process step by step:

• Step 1: Access the GST portal using your login credentials.
• Step 2: From the 'Service' tab at the top of the portal page, select 'Returns' from the drop-down menu. The 'Invoice Management System (IMS) Dashboard' option will be visible under 'Returns'.
• Step 3: The IMS dashboard will then display options for 'View Inward Supplies' and 'Outward Supplies'.
  • 'Inward Supplies' is for recipients to view and act on invoices from suppliers/vendors.
  • 'Outward Supplies' allows suppliers to check the status of actions taken by recipients on invoices they have submitted.

Recipient's Guide to Using IMS

• Step 1: Clicking 'VIEW' under 'Inward Supplies' will prompt a message indicating that invoices are considered accepted if no action is taken before the 14th of the month (prior to GSTR-2B generation). Confirm this message to proceed.
• Step 2: After confirmation, a new window will open with the following sections:
  • All other ITC: This default tab helps manage invoices from domestic suppliers. It categorizes invoices saved or filed in GSTR-1/1A or IFF, including B2B invoices (and amendments), debit notes (and amendments), credit notes (and amendments), and Eco [9(5)] invoices (and amendments).
  • Inward Supplies from ISD: This tab handles taxes paid by and issued to a business's branches.
  • Import of Goods: This section covers tax on imported goods and services.
  • Users can access 'VIEW ADVISORY' for guidance and a 'HELP' button for further clarification.
• Step 3: A summary of categorized invoices, with hyperlinks to specific records, will be displayed. All records saved/filed in GSTR1/IFF/GSTR-1A are initially in the 'No Action' column.
  • No Action: Shows the number of B2B invoices awaiting action.
  • Accepted: Indicates the number of accepted invoices.
  • Rejected: Displays the total count of rejected B2B invoices.
  • Pending: Represents invoices set aside for future review.
• Step 4: Selecting the 'B2B - Invoices' link will open a detailed window with all B2B invoice records and their action statuses. You can review individual invoices, search for specific ones by unique ID, or filter records based on their action status.
• Step 5: Actions can be taken on any invoice by choosing 'A' (Accept), 'R' (Reject), or 'P' (Pending) options. After selecting an option, the invoice status changes accordingly. Taxpayers must click the 'SAVE' button to record their actions.

Supplier's Perspective: Using IMS

• Step 1: Click the 'VIEW' button under the 'Outward Supplies' tile to check the status of your reported outward supplies based on recipient actions.
• Step 2: The 'Outward Supplies' page will load. Select the relevant Financial Year and Return Period from the dropdown menus, then click 'SEARCH'.
• Step 3: A table displaying all B2B supplies reported in GSTR-1/IFF/GSTR-1A will appear. Suppliers can view advisory details via 'VIEW ADVISORY' or seek help using the 'HELP' button.
• Step 4: Taxpayers can view documents categorized under:
  • 4A, 4B, 6B - B2B, SEZ, DE Invoices
  • 9B - Credit/Debit Notes
  • 15 - Supplies under Section 9(5)
  • 9A - Amended B2B Invoices
  • 9C - Amended Credit/Debit Notes (Registered)
  • 15A - Amended Supplies under Section 9(5) Clicking descriptions or numbers in the records column will lead to detailed tables.
• Step 5: Any hyperlink will show all reported documents in that table. Taxpayers can filter the list, search for specific items, download details in Excel format, and return to the summary view.
• Step 6: Invoice details for all other tables can be accessed and downloaded similarly.

Important Note: As per the advisory, certain records, such as documents where ITC is ineligible due to POS rules or Section 16(4) of the CGST Act, and records attracting Reverse Charge Mechanism (RCM) Supplies, are not available for recipient actions in IMS but are visible to suppliers with the status 'No Action Taken'. Furthermore, any action taken on records can be changed by the recipient taxpayer until the GSTR-3B filing due date for the return period. If an action is modified after GSTR-2B generation, the taxpayer must recompute their GSTR-2B based on the updated actions.

Challenges of Manual Invoice Management

Before the introduction of IMS in the GST portal, recipients manually reconciled purchase register records with GSTR-2B invoices using accounting software and spreadsheets, which had several disadvantages:

• High Potential for Data Entry Errors: This was a common issue, particularly for businesses dealing with many vendors and customers. Manual cross-verification could not fully eliminate errors in invoice verification, validation, tracking, and the ITC claim process.
• Delayed or Inaccurate ITC Calculations: Manual invoice processing on the GST portal often caused delays in record amendments and occasional unintentional errors, leading to discrepancies in tax liabilities for both recipients and suppliers. This resulted in compliance problems and affected recipients' cash flow due to delayed ITC.
• Difficulties in Vendor Relationships: Clerical delays expected when manually processing invoices in the GST portal could cause compliance issues due to mismatches in tax liabilities and inaccurate ITC computation, potentially harming a company's reputation as a partner with its vendors, suppliers, and customers.

Advantages of an Automated Invoice Management System

With the introduction of IMS, relying solely on accounting software and spreadsheets for reconciliation will complicate GST compliance. Integrated cloud-based compliance solutions can streamline processes by automatically syncing data with IMS. Key benefits of adopting a fully automated integrated solution include:

• Streamlined Reconciliation: Instead of switching between spreadsheets and accounting software, leveraging an integrated solution for reconciling GSTR-2B, purchase registers, and IMS reduces errors and enhances compliance efforts.
• Real-time ITC Updates: All actions or changes made in ITC on the compliance software will automatically reflect in IMS, freeing finance teams from repetitive tasks.
• Simplified GSTR-2B Computation: Seamless IMS integration removes the need to manually generate GSTR-2B on the 14th of each month or regenerate it after making changes in IMS.
• Effortless Table 4 Creation: You can continue creating Table 4 of GSTR-3B, which pertains to Input Tax Credit, without any additional challenges or steps.

Integration with Other Business Systems

Your existing ERP/accounting systems or reconciliation processes must accommodate the newly launched IMS functionality. Seamless integration is crucial to prevent errors that could lead to departmental scrutiny.

Best Practices for IMS Implementation

The IMS functionality will be fully operational for all users from October 14, 2024. Until then, CFOs and finance managers can take steps to ensure a smooth transition for their teams:

• Stay Informed: In collaboration with GSTN, the government has published manuals on how to use the IMS functionality. These manuals offer detailed documentation on features within IMS and discuss how users should take actions inside the IMS dashboard. Informational resources also regularly discuss IMS and guide taxpayers on its functionalities.
• Team Training: Educate team members on the differences between pre- and post-IMS workflows. For instance, accountants now need to reconcile with IMS in addition to the purchase register and GSTR-2B.
• Collaborate with Reliable Suppliers: Recipient taxpayers should partner with dependable suppliers to avoid compliance issues and delays in claiming rightful ITC.
• Adopt Cloud-based Compliance Software: Transitioning to cloud-based compliance software can help reduce errors, improve compliance, and relieve finance teams from redundant tasks, moving towards more streamlined and efficient workflows.