GST's Invoice Management System (IMS): What It Means for Your Business

In this blog, we shall discuss the importance of IMS, what this means for a business, what changed from the earlier 2B system of reconciliation and how businesses can leverage the most of the IMS features through Entries AI

The GST ecosystem has evolved with the introduction of the Invoice Management System (IMS), a facility designed to empower taxpayers in managing their supplier invoices with greater precision and control. This new feature enables taxpayers to actively accept, reject, or mark invoices as pending—a crucial step in ensuring accurate input tax credit (ITC) claims.

The System So Far: Passive Taxpayer Involvement

Until now, taxpayers had no control over the data provided by suppliers through GSTR-1, which directly reflected in Form GSTR-2B. Here’s how the earlier system worked:

• One-Way Data Flow: Suppliers uploaded invoices via GSTR-1/1A/IFF. These invoices were automatically populated in the recipient taxpayer’s GSTR-2B without any intervention.
• Lack of Validation Options: Taxpayers could not correct discrepancies, mark invoices as pending, or reject invalid ones.
• Implications for Taxpayers: Errors or mismatches in supplier-uploaded invoices meant taxpayers had to manually reconcile or forgo the ITC until corrections were made.

This left taxpayers as mere spectators, unable to take any action on discrepancies that could significantly impact their ITC claims.

The IMS Revolution: From Passive Spectator to Active Participant

The introduction of IMS marks a major shift in how taxpayers interact with invoice data. Here’s what IMS brings to the table:

1. Actionable Invoice Management: Taxpayers can now:
   
   
   • Accept invoices that match their Purchase Register (PR).
   • Reject invoices that do not belong to them.
   • Mark as Pending invoices requiring corrections or further verification.
2. Improved ITC Accuracy: By enabling taxpayers to filter and act on supplier-uploaded data, IMS ensures that only valid invoices flow into GSTR 2B/contribute to ITC claims.

Under the previous system, any invoice uploaded by a supplier through GSTR-1 would automatically reflect in the taxpayer's GSTR-2B, regardless of its accuracy or relevance. This often left taxpayers grappling with errors, discrepancies, and incorrect Input Tax Credit (ITC) claims. Taxpayers had to rely on suppliers to make corrections, which delayed compliance and increased the risk of penalties during audits.

Now: What Changed?

The introduction of the Invoice Management System (IMS) has transformed how taxpayers manage Input Tax Credit (ITC) claims. With IMS, only accepted invoices are considered for ITC, empowering taxpayers to:

• Reject invalid invoices that are incorrect or do not belong to them.
• Park disputed invoices by marking them as pending for further verification.

Key Considerations

While IMS provides real-time data, taxpayers may only begin reconciling the draft 2B data with their Purchase Register (PR) after the 14th of the month due to the following reasons:

1. Limited data availability on the IMS portal initially:
   
   
   • Limited data may be available on the IMS portal until suppliers file their GSTR-1/IFF by the 11th or 13th of each month, except in the case of e-invoices.
2. Non-e-invoice cases:
   
   
   • For all non-e-invoice cases, suppliers may not upload and save invoices as drafts on the GST portal before the due date for filing GSTR-1/IFF returns

Practical Implication:

In practical terms, taxpayers can use the GSTR-2B data for reconciliation with their internal PR. However, there is a key change: the 2B data will remain a draft and will be a final one only when the GSTR-3B return is finalized. Here is why:

Before the introduction of IMS, GSTR-2B was always final and could not be altered. With IMS, the GSTR-2B data will be a final one only after the GSTR-3B return is finalized. The reasons for this change are:

• Until the GSTR-3B return is finalized, taxpayers can reject, accept, or mark any record as pending on the IMS portal.
• As a result, the finalized GSTR-2B data depends on the actions taken by taxpayers up until the GSTR-3B return is finalized.

What Taxpayers Need to Do

To fully leverage the benefits of IMS, taxpayers must take proactive steps in managing their invoice data:

1. Reconcile Data with the Purchase Register (PR):
    
   • Reconcile the draft GSTR-2B with your internal PR data. Real-time syncing of 2B data is essential, as it can change until the GSTR-3B return is finalized, to get the final input tax reconciled data.
   • Identify invalid records and mark them as rejected on the IMS or leave them pending.
2. Accept Invoices Automatically:
    
   • Taxpayers don’t need to manually accept every invoice on the IMS. Invoices that are accurate and not explicitly rejected or kept pending are deemed accepted.
3. Identify Discrepancies:
    
   • Find transactions in their PR that suppliers failed to upload in their GSTR-1.
   • Spot transactions in IMS that are missing in the PR, which could indicate an oversight by the internal finance team.
4. Follow Up with Stakeholders:
    
   • Coordinate with suppliers to upload missing invoices in GSTR-1.
   • Instruct internal teams to account for transactions found in IMS but not in the PR.

How Entries AI IMS/2B Reco app powers up GST Compliance

Entries AI IMS/2B Reconciliation App eliminates the challenges of manual reconciliation and ensures a seamless workflow for businesses. Here's how it simplifies the entire process:

1. Automated Reconciliation:
    
   • Upload the PR data into the app. 2B data gets synced automatically.
   • The app automatically identifies mismatches:
     • Records not belonging to the taxpayer that need to be rejected.
     • Transactions missing in PR but present in 2B, or vice versa.
2. Actionable Insights:
    
   • Provides clear insights into which actions—reject, mark as pending, or follow up—need to be taken.
   • Eliminates the need for manual data comparison.
3. Supplier Follow-Up Automation:
    
   • Automatically generates workflows to notify suppliers of missing transactions in GSTR-1.
4. Internal Collaboration:
    
   • Assigns tasks to the internal finance team for accounting transactions found in 2B but not in the PR.
5. End-to-End Automation:
    
   • Tracks every step of reconciliation, follow-ups, and resolutions.
   • Maintains a comprehensive audit trail, ensuring compliance and transparency.
6. Simplifies ITC Claim Process:
    
   • Automates every step of the reconciliation process, ensuring accurate ITC claims without manual errors or missed deadlines.

Key Benefits of Entries AI IMS/2B Reconciliation App

• Time Savings: No more tedious manual reconciliations or endless follow-ups.
• Enhanced Accuracy: Automates data validation for reliable ITC claims.
• Streamlined Collaboration: Reduces dependency on offline chasing and back-and-forth emails.
• Compliance Confidence: Comprehensive audit trails make GST compliance hassle-free.

At Entries AI, we are more than just a technology provider-we are leaders in managed Accounting, Payroll, and Compliance services for growing startups. Trusted by leading CA firms and venture funded Companies, we deliver cutting-edge solutions that simplify financial processes and empower organizations to focus on growth.

With the introduction of GST IMS, Entries AI leverages its expertise to deliver a powerful 2B/IMS Reconciliation App that revolutionizes how businesses manage GST compliance. By integrating automation, precision, and seamless end-to-end workflows, Entries AI delivers AI-powered solutions for growing businesses

• GST Registration (Powered by Entries AI Fulcrum App)
• GST Input Tax Credit (ITC) Reconciliation (Powered by Entries AI 2B/IMS Reco App)
• GSTR-1, 3B, Annual Filing (Powered by Entries AI Compliance App)
• GST e-Invoice Software, E-Way Bills (Powered by Entries AI Business App)
• GST Refund and Litigation Services (Powered by CNK & HSKA Associates LLP)