How to Handle Inadvertently Rejected Records in GST IMS for Accurate ITC Claims

The Invoice Management System (IMS) on the GST portal enables recipient taxpayers to accept, reject, or mark invoices as pending to streamline Input Tax Credit (ITC) reconciliation. However, inadvertent rejections may occur, affecting ITC claims and compliance. This guide outlines steps for rectifying such errors: recipients must request suppliers to re-furnish unchanged records via GSTR-1A or amendment tables in subsequent returns, after which recipients must accept and recompute GSTR-2B to reflect the corrected data.

The impact on suppliers’ liability remains neutral when values are unchanged, as the system avoids double taxation. Similarly, for mistakenly rejected credit notes, ITC reversal can be managed by re-reporting and recomputing GSTR-2B, ensuring proper liability adjustments. Clear communication, timely action, and compliance with amendment deadlines under the CGST Act are crucial for accurate ITC availment and GST return filing.

Seamless Solutions for Inadvertently Rejected Records on IMS: A Comprehensive Guide for GST Taxpayers

The Invoice Management System (IMS) on the GST portal, introduced to streamline Input Tax Credit (ITC) reconciliation, empowers recipient taxpayers to accept, reject, or mark invoices as pending. While enhancing transparency and accuracy, situations may arise where records are inadvertently rejected. This article provides a detailed guide on how to handle such scenarios, ensuring proper ITC availment and compliance for both recipients and suppliers.

Understanding the Invoice Management System (IMS)

The IMS is a critical functionality that allows recipients to actively manage their inward supplies. It facilitates better reconciliation with supplier records and aims to reduce errors in ITC claims. All records reported or saved by the supplier in their GSTR-1, Invoice Furnishing Facility (IFF), or GSTR-1A are made available on the recipient’s IMS dashboard. While the system auto-generates a draft GSTR-2B on the 14th of every month (for monthly filers), based on accepted or deemed accepted records, recipients retain the flexibility to take actions (accept/reject/pending) until the filing of their GSTR-3B for that period.

A key point to note is that if no action is taken on a record in IMS, it is deemed accepted at the time of GSTR-2B generation. Rejected records, while visible in GSTR-2B, do not flow into GSTR-3B for ITC auto-population.

Question 1: How can a recipient avail ITC of wrongly rejected Invoices/Debit Notes/ECO-Documents in IMS as corresponding GSTR-3B of same tax period was also filed by recipient?

When a recipient mistakenly rejects an invoice, debit note, or E-commerce operator (ECO) document in IMS, and has already filed their GSTR-3B for that period, the process to rectify this and avail ITC involves the following steps:

1. Request to Supplier: The recipient must communicate with the corresponding supplier and request them to report the same record (without any change) again.
2. Supplier’s Action: The supplier should re-furnish the identical record in either:
   • The same return period’s GSTR-1A (if permissible within the timeframe before GSTR-3B filing).
   • The respective amendment table of a subsequent GSTR-1/IFF.
3. Recipient’s Acceptance and Recomputation: Once the supplier furnishes the amended record, the recipient will be able to view and accept this record on the IMS. After accepting the record, the recipient must recompute GSTR-2B on IMS. This recomputation will update the GSTR-2B to reflect the acceptance of the previously rejected record.
4. ITC Availment: The recipient can then avail the ITC for the complete amended value, as the original record was wrongly rejected. However, it’s crucial to understand that this ITC will only be available in the GSTR-2B of the concerned tax period for which the amended document is furnished by the supplier. This means if the amendment is made in a subsequent period’s GSTR-1/IFF, the ITC will reflect in the GSTR-2B of that subsequent period.

Note: GSTR-1A is a crucial form that allows taxpayers to amend details of outward supplies reported in GSTR-1 for the same tax period, before filing GSTR-3B. It acts as a bridge for correcting discrepancies or omissions. GSTR-1A can be filed only once for a given tax period. For monthly filers, GSTR-1A becomes available after the due date of GSTR-1 (11th of the following month) or the actual date of filing GSTR-1, whichever is later, and remains open until the filing of GSTR-3B for that tax period. For quarterly filers, it’s available after the GSTR-1 due date (13th of the month following the quarter) or the actual GSTR-1 filing, until GSTR-3B filing.

Question 2: If any original record is rejected by the recipient and supplier furnishes the same record in GSTR-1A of same tax period or in the amendment table of GSTR-1/IFF of subsequent period, till the specified time limit, then what impact will it have on supplier’s liability?

When a supplier has correctly furnished an original record in GSTR-1/IFF, but it was wrongly rejected by the recipient in IMS, and the supplier subsequently furnishes the same record without any change in GSTR-1A of the same tax period or in the amendment table of a subsequent GSTR-1/IFF (within the specified time limit), the impact on the supplier’s liability will be zero.

This is because amendment tables in GSTR-1/IFF are designed to capture only the delta value (the difference between the original and amended values). Since the supplier is furnishing the exact same record (i.e., no change in values), the differential liability increase will be nil. The system recognizes that this is a re-reporting of an existing, already declared value, thus preventing a double incidence of tax liability for the supplier.

The “specified time limit” for furnishing amendments and availing ITC under Section 16(4) of the CGST Act, 2017, is generally the due date for furnishing the return under Section 39 for the month of September following the end of the financial year to which such invoice or debit note pertains, or furnishing of the relevant annual return, whichever is earlier.

Question 3: As a recipient taxpayer, how to reverse ITC of wrongly rejected Credit Note in IMS as the corresponding GSTR-3B has already been filed?

If a recipient taxpayer mistakenly rejects a Credit Note (CN) in IMS, and has already filed their GSTR-3B, leading to an incorrect ITC availment, the reversal process is as follows:

1. Request to Supplier: The recipient should request the concerned supplier to furnish the same Credit Note (CN) without any change again.
2. Supplier’s Action: The supplier needs to re-report the identical CN in either:
   • The same return period’s GSTR-1A.
   • The amendment table of a subsequent period’s GSTR-1/IFF.
3. Recipient’s Acceptance and Recomputation: Once the supplier furnishes the amended CN, the recipient can accept the CN on IMS. Crucially, the recipient must then recompute GSTR-2B on IMS. This action will ensure that the ITC gets correctly reduced.
4. ITC Reversal: As a result of accepting the amended CN and recomputing GSTR-2B, the recipient’s ITC will get reduced with the complete amended value. Since the entire original CN was rejected by the recipient, the reduced value will be the same as the value of the original CN, effectively reversing the ITC that should have been reversed initially.

Question 4: If any original Credit Note was rejected by the recipient and supplier furnishes the same credit note in GSTR-1A of same tax period or in the amendment table of GSTR-1/IFF of any future tax-period, till the specified time limit, then what impact will it have on supplier’s liability?

When an original Credit Note was rejected by the recipient in IMS, and the supplier subsequently furnishes the same Credit Note in GSTR-1A of the same tax period or in the amendment table of GSTR-1/IFF in any future tax period (within the specified time limit), the impact on the supplier’s liability unfolds in two stages:

1. Initial Impact (Increase in Liability): At the first instance, due to the recipient’s rejection of the original credit note, the supplier’s liability would have effectively “added back” in their open GSTR-3B return. This happens because the reduction in liability intended by the credit note was nullified by the recipient’s rejection, meaning the supplier’s original output tax liability remains unadjusted.
2. Subsequent Impact (Reduction in Liability): However, as the supplier subsequently furnishes the same credit note again (without any changes) in GSTR-1A of the same tax period or in the amendment table of a subsequent GSTR-1/IFF, the supplier’s liability for this amendment will get reduced again, corresponding to the value of the amended CN. Since the amended CN is the same as the original, the liability reduction will match the initial “added back” amount.

Therefore, the net effect on the liability of the supplier will be only once. The initial increase due to rejection is balanced out by the subsequent reduction upon re-furnishing the same credit note. This mechanism ensures that the supplier’s liability correctly reflects the issuance of the credit note, despite the initial rejection by the recipient.

Key Takeaways and Best Practices

Communication is Key: Prompt communication between the recipient and supplier is paramount to resolve inadvertently rejected records efficiently.

Utilize GSTR-1A/Amendment Tables: Suppliers should leverage GSTR-1A for same-period corrections or the amendment tables of subsequent GSTR-1/IFF for corrections in later periods.

Recipient’s Responsibility to Recompute GSTR-2B: After any action on IMS (accepting or rejecting), the recipient must recompute their GSTR-2B to ensure the updated information is reflected and considered for their ITC claims or reversals. The system will not allow GSTR-3B filing if there are pending recomputations after actions have been taken on IMS.

Time Limits: Always be mindful of the time limits prescribed under the CGST Act for availing ITC and making amendments.

Draft GSTR-2B: The GSTR-2B generated on the 14th is a “Draft.” Actions taken on IMS after this date necessitate a recomputation of GSTR-2B before filing GSTR-3B to ensure accurate figures.

Preventive Measures: Regular reconciliation of purchase registers with GSTR-2B and proactive action on IMS records can minimize instances of inadvertent rejections.

By diligently following these guidelines, taxpayers can effectively manage inadvertently rejected records on the IMS, ensuring accurate ITC claims, proper liability reporting, and overall GST compliance.

FAQs on Invoice Management System

What is the Invoice Management System (IMS) in GST?
The IMS is a feature on the GST portal that allows recipient taxpayers to manage inward supplies by accepting, rejecting, or marking supplier-reported invoices, debit/credit notes, and ECO documents as pending, helping in accurate Input Tax Credit (ITC) reconciliation.

What happens if no action is taken on a record in IMS?
If no action is taken, the record is deemed accepted at the time of GSTR-2B generation, and it becomes eligible for ITC auto-population in GSTR-3B.

Are rejected records reflected in GSTR-3B?
No, rejected records are visible in GSTR-2B but are not auto-populated in GSTR-3B, which may lead to loss of ITC unless rectified.

How can a recipient claim ITC for a wrongly rejected invoice in IMS after filing GSTR-3B?
The recipient must ask the supplier to re-report the same record in GSTR-1A or the amendment table of GSTR-1/IFF. Once accepted by the recipient in IMS and GSTR-2B is recomputed, ITC can be claimed in the updated GSTR-2B of the amended period.

What is the role of GSTR-1A in correcting rejected records?
GSTR-1A allows suppliers to amend or re-report records for the same tax period, helping correct discrepancies before GSTR-3B is filed. It is available only once per period.

Can a supplier re-furnish records in a later period if GSTR-1A is not available?
Yes, the supplier can report the same record in the amendment table of a subsequent GSTR-1/IFF, provided it’s done within the time limits specified in the CGST Act.

Will the supplier incur additional tax liability for re-furnishing the same record?
No, if the re-furnished record is identical and values remain unchanged, there is no impact on the supplier’s liability, as only differential values are considered in amendment tables.

What is the time limit to avail ITC or amend records under GST?
As per Section 16(4) of the CGST Act, the time limit is the earlier of the return due date for September of the following financial year or the date of filing the annual return.

What should a recipient do if a Credit Note is wrongly rejected in IMS and GSTR-3B is already filed?
The recipient should request the supplier to re-report the same CN. After accepting it in IMS and recomputing GSTR-2B, the recipient’s ITC will be correctly reduced to reflect the reversal.

Does a supplier’s liability change when a rejected Credit Note is re-reported?
Initially, the liability increases due to rejection. Once the CN is re-reported and accepted, the liability reduces again, resulting in a net neutral impact.

Why is recomputing GSTR-2B important after IMS actions?
Recomputing GSTR-2B ensures that any accepted or re-accepted records are correctly reflected, which is essential for accurate ITC availment or reversal in GSTR-3B.

Can GSTR-3B be filed without recomputing GSTR-2B after IMS actions?
No, if records are accepted or rejected in IMS after GSTR-2B is generated, recomputing GSTR-2B is mandatory before GSTR-3B filing to avoid discrepancies.

How can taxpayers prevent inadvertent rejections in IMS?
Taxpayers should regularly reconcile their purchase register with GSTR-2B, review IMS records carefully before taking actions, and maintain timely communication with suppliers.

What are the consequences of not correcting a wrongly rejected record in IMS?
Failure to correct may result in loss of ITC or incorrect reporting in returns, leading to non-compliance and potential tax disputes.

Is it necessary to communicate with the supplier to correct a rejected record?
Yes, the supplier must re-furnish the same record, making communication essential for rectification and accurate ITC claims.

Can amendment tables in GSTR-1/IFF be used to re-report Credit Notes?
Yes, suppliers can re-report identical Credit Notes in the amendment table of GSTR-1/IFF of a subsequent period if GSTR-1A is unavailable.

What does “delta value” mean in the context of amendment tables?
Delta value refers to the difference between original and amended values. If no change is made, the system treats the re-furnished record as having no impact on liability.

What is the significance of the GSTR-2B generated on the 14th of each month?
It serves as a draft summary of ITC eligibility. Actions taken on IMS after this date require recomputation to reflect changes in the final GSTR-2B.

Are IMS actions relevant for quarterly return filers as well?
Yes, IMS is applicable to both monthly and quarterly filers, with GSTR-1A and amendment timelines adjusted accordingly.

Can the same GSTR-1A be filed multiple times for a period?
No, GSTR-1A can only be filed once for a specific tax period, so all necessary corrections must be included before submission.