Starting 1st Oct 2024, the Goods and Services Tax Network (GSTN) will introduce a new Invoice Management System (IMS) on the GST Portal. This system is designed to streamline the process of managing and correcting invoices, which is crucial for claiming Input Tax Credit (ITC). The new IMS focuses on automation, E-Invoicing and better integration with the GST portal, ensuring real time invoice validation and filing. This system is designed to enhance transparency, accuracy and operational efficiency in handling invoices under the Goods and services Tax (GST) framework.
Compliance process in invoice management system
The compliance process for IMS under GST involves the following key steps :
1. Invoice generation : Businesses create invoices with essential details like GSTIN, item description, HSN code, tax details and customer information.
2. E-Invoicing : For eligible businesses invoices are uploaded to the invoice registration portal, the IRP validates the invoice and assigns a unique Invoice Reference Number (IRN) and a QR code for each invoice.
3. Data transfer to GST portal : Once the IRP validates the invoice, the data is automatically shared with the GST system, updating the GSTR 1 of the supplier and reflecting in the GSTR-2A of the recipient for input tax credit (ITC) claims.
4. GST return filing : With the help of IMS, businesses can automate the return filling process. The System ensures that invoices are properly reflected in GSTR-1 and GSTR 3B.
5. Reconciliation : IMS helps reconcile invoices between suppliers and buyers to ensure that all invoice data match, avoiding discrepancies in ITC claims and return filing.
Here, taxpayers are allowed to match their invoices with those issued by suppliers, wherein they can accept or reject it as needed. Till the GSTR- 3B filing, the actions on invoices like accepting, rejecting or pending can be taken up. The Invoice will be automatically accepted if no action is taken. GSTR- 2B process will also be streamlined with the help of Invoice Management System (IMS) which will allow only accepted invoices to contribute to ITC.
For QRMP taxpayers, GSTR-2B will be generated quarterly. Also, the changes will reflect/reset in the recipient’s IMS dashboard, on any changes made to an invoice before the supplier flies GSTR-1. IMS has been looked up as a system that will improve the accuracy of ITC claims without adding additional Compliance burdens, providing an organized and transparent way to handle invoice discrepancies.
If the supplier has amended any invoice filed in GSTR-1 through GSTR- 1A then same will follow to IMS, however, ITC corresponding to the same will flow in GSTR-2B of the recipient, generated for the subsequent month. The Invoices which are pending can be availed by taxpayers at any time but not later than the limits mentioned in section 16(4) of the CGST Act, 2017. In GSTR 1 or GSTR-5 or GSTR-6 all the invoices/ records reported or saved by the supplier taxpayer will be available in the IMS dashboard of the recipient taxpayer for taking actions. Also, supplier will be able to see, what action his recipient has taken on invoices in IMS.
At the time of generation of GSTR-2B only the filed invoices/records by the supplier, will be considered for the computation of ITC. A draft GSTR-2B will be made available based on the current cut-off dates and action taken by the recipient on 14th of the subsequent month as generated. The recipient will be free to take actions of accept/reject or keep pending even after generation of GSTR- 2B till the filing of GSTR-3B. In one case the recipient taxpayer will have to recompute their GSTR-2B, only if they have taken action on any invoice after 14th of the month. No action can be taken after filling of GSTR-3B for the same month. GSTR -2B for the subsequent month won’t be generated until GSTR -3B is filed by the taxpayer.
The invoices/records can be mentioned basis to the action taken by the taxpayer –
1. Where no action has been taken by the recipient, it will be treated as accepted at the time of GSTR-2B generation.
2. The accepted records will be part of the GSTR-2B generation.
3. The rejected records will not be considered for GSTR -2B generation.
4. The pending records will not be taken into account for GSTR -2B generation for the month, it will be carried forward in IMS itself for further action in subsequent months.
The Taxpayers will not have any added compliance burden but a functionality which is no action records shall be considered as accepted and the taxpayers will only be required in case the record needs to be rejected or kept pending.
Benefits of invoice management system
Invoice management system is expected to offer multiple benefits to small and large businesses.
Accurate audit : Auditors will now be able to check each invoice thoroughly without requiring them to have access to many other files, these will lead to low audit errors.
Less error in GSTR-3B : Summary view of all inward invoices is available in the system, so the chances of missing out of any invoices before filing GSTR-3B is nil.
Simplified way to manage pending invoices : : The pending invoices moves to upcoming tax periods without affecting GSTR-2B and 3B.
Available for QRMP taxpayers : For Small businesses, the new invoice management system will be available and helpful. There will be no auto population of GSTR-2B of months 1 and 2 in a quarter. For them, GSTR-2B will be generated quarterly.
However, businesses will need to prepare for this change by updating their systems and processes, as it involves a new layer of compliance. While there may be initial challenges, particularly for small and medium-sized enterprises (SME), the long-term benefits include reduced administrative errors and improved efficiency in handling GST returns.
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