Advisory on Invoice Management System (IMS): Balancing Self-Assessment and IMS Compliance - 13th November 2024
- Introduction of IMS
The Invoice Management System (IMS) was introduced on the GST Portal on 14th October 2024.
It enables recipient taxpayers to accept, reject, or keep invoices pending as saved or filed by their suppliers in GSTR-1/1A/IFF.
The first GSTR-2B reflecting recipient actions taken in IMS will be generated on 14th November 2024 for the October 2024 period.
2. IMS Dashboard
In IMS Dashboard there are two sections – 1. Inward 2. Outward
2.1. In inward section Taxpayer can select action against the invoices reflected from their suppliers.
2.2. To facilitate transparency, the Supplier View in IMS allows suppliers to see the actions taken by recipients on reported outward supplies.
2.3. This view enables suppliers to monitor recipient actions and identify or resolve any discrepancies, helping to avoid incorrect recipient actions on invoices.
In short the GSTR-3B will now be prepared as per IMS.
3. Non-Actionable Invoices in IMS (Supplier View Status: ‘No Action Taken’)
3.1. Certain invoices are not actionable by recipients in IMS but are visible in Supplier View, labelled as ‘No Action Taken’
3.2. Ineligible ITC Invoices due to Place of Supply (POS) rules or as per Section 16(4) of the CGST Act.
3.3. Reverse Charge Mechanism (RCM) Supplies
4. Modification of Actions by Recipient Taxpayers
4.1. Recipients can modify actions taken on invoices until the filing of GSTR-3B for the return period.
4.2. If changes are made after GSTR-2B generation, the recipient must Recompute GSTR-2B by clicking the "Recompute" button, ensuring GSTR-2B reflects the latest actions.
Impact on Return Filing Ease
•The IMS aims to streamline compliance by providing real-time visibility of invoice status, reducing mismatches, and allowing timely corrective actions. However, the new steps may increase initial complexity as taxpayers adjust to the additional tasks of accepting or rejecting invoices in IMS.
•Over time, as suppliers and recipients become accustomed to IMS, return filing is expected to become more accurate and manageable, reducing potential disputes and adjustments at later stages.
Potential Areas of Perceived Contradiction in case of Self-assessment and IMS
A. Data Dependency:
A.1. While self-assessment is based on the principle of taxpayer independence, IMS creates a dependency on supplier-uploaded data for reconciliation.
A.2. Taxpayers often face challenges in convincing their suppliers or customers to comply with tax regulations promptly. However, ensuring compliance is fundamentally the responsibility of the tax department, not individual taxpayers. When taxpayers must shoulder this burden, it adds unnecessary complexity and strains business relationships.
B. Reconciliation Burden and Follow-Ups:
B.1. IMS imposes a significant reconciliation burden on taxpayers. They must verify invoice data from suppliers and resolve mismatches, which often requires repeated follow-ups.
B.2. This process demands substantial time and resources. While in an ideal scenario, such efforts would streamline credit flow and ensure a seamless ITC chain, this proposition is largely hypothetical. Real-world scenarios involve delays, non-compliance, and human errors that make this process cumbersome and inefficient.
C. Flagging and Increased Scrutiny:
C.1. IMS mechanism of flagging and scrutinizing each transaction introduces an additional layer of compliance. While it aims to ensure accuracy, it can inadvertently create friction between businesses.
C.2. Excessive interference in each other’s tax compliance processes may damage trust and business relationships. Instead of focusing on core business operations, stakeholders may find themselves embroiled in tax compliance disputes due to such scrutiny.
These contradictions highlight the practical challenges in aligning IMS and self-assessment. While the systems aim to improve compliance and transparency, they also risk creating inefficiencies and disruptions in business operations.
The Invoice Management System (IMS) and self-assessment are pivotal in making GST a taxpayer-friendly and transparent regime. IMS ensures robust invoice management and ITC reconciliation, while self-assessment empowers taxpayers to independently manage their compliance responsibilities. Together, these systems enhance efficiency, reduce manual intervention, and foster a culture of voluntary compliance in the GST ecosystem.