GSTN rolls out new invoice system to enhance ITC claims; here's how it'll work

In a significant enhancement to the GST ITC ecosystem, the Goods and Services Tax Network (GSTN) has announced the rollout of a new Invoice Management System (IMS) on the GST portal. Starting October 1, 2024, this feature will help taxpayers streamline, manage, and correct invoices, thereby improving the accuracy of Input Tax Credit (ITC) claims.

“This will also facilitate taxpayers in matching their records/invoices vis-a-vis issued by their suppliers for availing the correct Input Tax Credit (ITC) and shall allow the recipient taxpayers to either accept or reject an invoice or to keep it pending in the system, which can be availed later,” the advisory issued on September 3, 2024, said.

How will the IMS work?

Once a supplier saves an invoice in their GSTR-1, it will be reflected in the recipient taxpayer's IMS dashboard. The recipient taxpayer can then either accept, reject, or keep the invoice pending. Accepted invoices will automatically be included in the eligible ITC section of the recipient’s GSTR-2B and, for the respective period, be reflected in their GSTR-3B. If no action is, however, taken, the invoice will be deemed accepted and included in GSTR-2B. However, rejected or pending invoices will not count towards ITC until resolved. Supplier will also be able to see what action his recipient has taken on invoices in IMS.

For taxpayers using the Quarterly Return Monthly Payment (QRMP) scheme, the IMS aligns with their quarterly filing schedule. Invoices submitted via the Invoice Furnishing Facility (IFF) will appear on the IMS dashboard, and GSTR-2B, summarising eligible ITC, will be generated quarterly. While the GSTR-2B would be generated only on a quarterly basis, the scheme aims to reduce the compliance burden for small taxpayers by allowing them to file returns quarterly, while still keeping track of transactions monthly.

The new facility will provide control over ITC claims to the taxpayers, enabling them to match records with supplier invoices, ensuring accuracy and reducing audit risks. Furthermore, pending invoices can be addressed in future tax periods, ensuring that only genuine and verified invoices contribute to ITC claims.