Invoice Management System (IMS) Process Flow: How to Accept, Reject Invoice?

GSTN (Goods and Services Tax Network) recently introduced the Invoice Management System (IMS) as an additional layer in the existing reconciliation process in the GST portal on 1 October 2024. Both the GST authority and the indirect taxation experts expect the system to streamline the processes of ITC claims for business and help audit transactions more effectively.  

This article discusses the new IMS functionality, explains how it helps users, and how to use the new feature for efficient ITC claims and compliance.  

Key features of an Invoice Management System

The Invoice Management System or IMS within the GST portal offers several key features that make jobs more accessible for users. These features are:

• Communication functionality - The IMS improves the communication process between suppliers and their recipients. By providing the recipient with options to either
  • Accept
  • Reject or
  • Keep the invoice pending,

A recipient user can check invoices instantly once they are saved or filed in GSTR-1/1A/IFF by a supplier and act on the invoice to include it in the ITC claim process.  

• Single-window operation—Now, taxpayers can track, verify, and act on most invoices (except a few) from different suppliers in a single dashboard, saving a lot of workload. 
• Summary view of invoices—The IMS will offer a consolidated filtered view of all invoices, their current status, and the actions that the recipient has taken on each invoice. For example, suppose the recipient has rejected an invoice. In that case, they can visit the amended invoices section within the dashboard to check if the supplier has changed it. 
• Ease of amending invoices/records—The new invoice management functionality has made it easier for suppliers to check rejected invoices in real-time. So they can make changes while filing GSTR-1 or amend the rejected invoice through GSTR-1A without delay. It reduces unnecessary delays for recipients in claiming their ITC. Also, it helps suppliers file the correct tax liability in their GSTR-3B.
• Reset of Records—The portal allows users to reset all action statuses taken within the due date of filing GSTR-3B. However, the RESET option is enabled only when the user selects multiple invoices by clicking the checkboxes against them.   
• Bulk Selection—The new functionality also helps the user select multiple records that are either displayed on the current page of the screen or all the records on all the pages.
• Download in Excel Format—IMS allows taxpayers to download the details of invoices in an easy-to-understand Excel format. This helps the user verify and cross-check all the records offline.

Step-by-Step Process of Invoice Management System

The Invoice Management System in the GST portal helps recipient taxpayers efficiently manage decisions on each inward invoice from a single interface. Let's understand the process step by step. 

Step 1: Log into The GST portal using your login credentials. 

Step 2: After logging in, navigate to the 'Service' tab at the top of the portal page and select 'Returns' from the drop-down menu. Under 'Returns,' you will find the Invoice Management System (IMS) Dashboard option.

Step 3: This option will display the IMS dashboard with View Inward Supplies and Outward Supplies options.

From a particular user's perspective, 

• The 'Inward Supplies' section allows recipients to view and take action on invoices submitted by the suppliers/vendors.
• The 'Outward Supplies' section allows suppliers to check the status of actions taken by recipients on invoices they have saved or filed. 

Step 4: Clicking on the VIEW button on 'Inward Supplies' will inform the user that invoices will be deemed accepted unless the user takes action before the 14th of the month, i.e., before GSTR-2B generation. You must confirm the message to proceed.

Step 5: After clicking on the OKAY button, a new window with the following tabs will open- 

• All other ITC - It is the default tab and helps manage invoices from domestic suppliers and vendors. As shown in the screenshot below, here is the list of categories under which invoices saved or filed  in GSTR-1/1A or IFF by the supplier are classified:
  • B2B - Invoices
  • B2B - Invoices (Amendments)
  • B2B - Debit Notes
  • B2B - Debit Notes (Amendments)
  • B2B - Credit Notes
  • B2B - Credit Notes (Amendments)
  • Eco [9(5)] Invoices
  • Eco [9(5)] Invoices (Amendments)
• Inward Supplies from ISD—This tab is for taxes paid by and issued to a business's branches. 
• Import of Goods - This is for tax on imported goods and services. 
• At the top of the window, you will find 'VIEW ADVISORY' to view advisory information and a 'HELP' button to seek clarification. 

Step 6: A summary of the invoices, categorised in the above sections, with hyperlinks to respective records, will be displayed. Recipients can view and take the required action. All saved/filed records in GSTR1/IFF/GSTR-1A are in the default 'No action' column.

• No Action - This column lists the number of B2B invoices for which you have taken no action.   
• Accepted - The number of invoices you have accepted. 
• Rejected - Total number of B2B invoices you have rejected.  
• Pending - Invoices which have been kept for the future. 

Step 7: Clicking on the 'B2B - Invoices' link will open a new window with all B2B invoice records and respective action status. You can check each invoice one by one or search for any specific invoice with its unique identification number. A user can also filter invoice recording as per the action status. 

Step 8: You can take action on any invoice by selecting the corresponding A(Accept), R(Reject) or P(Pending) options against an invoice. By choosing the A option, the status of the invoice changes to ACCEPTED. By selecting R, the status becomes REJECTED; similarly, by selecting P, the invoice status becomes PENDING. The taxpayers must click the SAVE button to save the action taken on a record. 

Challenges in Manual Invoice Management

Before the introduction of IMS in the GST portal, recipients relied on accounting software and spreadsheets to manually reconcile the purchase register records with the invoices on GSTR-2B. It had multiple drawbacks.  

• High chances of data entry errors - This is the most common challenge, especially for companies dealing with multiple vendors, suppliers and customers. Manual cross-checking cannot fully overcome data entry errors, affecting invoice verification, validation, tracking, and the ITC claim process. 
• Delay in ITC claim or inaccuracy in ITC computation - Manual processing of invoice records in the GST portal often causes delays in amending records and, sometimes, unintentional errors, even in amendments. It resulted in discrepancies in tax liability for a particular taxation period for both recipients and suppliers, causing compliance issues in their return submissions. Delays in receiving ITC also affect the cash flow of recipients.  
• Difficulties in relation management with vendors and suppliers—Clerical delays are expected when manually processing invoices in the GST portal. Such delays often cause compliance issues due to mismatches of tax liabilities and inaccurate ITC computation for a period. This disturbs a company's reputation as a partner with its vendors, suppliers, and customers.

Benefits of an Automated Invoice Management System

After IMS comes into the picture, outsourcing reconciliation processes or relying on accounting software and spreadsheets will make your GST compliance more challenging than ever. Cloud-based compliance software like Clear will help you streamline your entire process by automatically syncing your data with the IMS. 

Here are the benefits of switching to a fully automated integrated solution

1. Unified Reconciliation Process: Instead of switching between spreadsheets and accounting software back and forth, leveraging an integrated solution for reconciling GSTR-2B, purchase register, and IMS can help you reduce errors, eventually improving your compliance efforts.
2. Real-time ITC updates: All the actions or changes made in ITC on the compliance software will flow into IMS, freeing up your finance teams from mundane tasks.
3. Computing GSTR-2B: Because of the seamless integration of IMS, there will be no need to manually generate GSTR-2B on the 14th of every month or regenerate it after changing the actions already taken on IMS.
4. Creating Table 4: You can continue creating Table 4 of GSTR-3B, which deals with Input Tax Credit, without any challenges or additional steps.

Integrations with Other Business Systems

Your existing ERP/accounting system or reconciliation process must accommodate the newly launched functionality. It should be integrated so there is no room for errors because any mistake can lead to the taxpayer being scrutinised by the department.

Best Practices for Implementing an Invoice Management System

The IMS functionality will be fully operational for all users from 14 October 2024. Until then, CFOs and finance managers can take care of a few things to help their finance and accounts department employees have a smoother transition to the new system. 

• Staying updated is the key: In collaboration with GSTN, the government has published manuals on how to use the IMS functionality. These manuals provide detailed documentation on features within the IMS and discuss how users should take actions inside the IMS dashboard. Clear also publishes detailed discussions regularly on the IMS and guides taxpayers on its functionalities. 
• Train your team members: Explain the difference between the workflows of pre- and post-IMS systems. For example, earlier, an accountant was only required to reconcile the purchase register with GSTR 2B. With the introduction of the IMS, the accountant had to reconcile with the IMS as well.
• Partner with responsible suppliers: Recipient taxpayers need to partner with responsible suppliers because collaborating with irregular vendors can not only cost you your peace of mind but also make you run behind them for claiming the ITC, which you legally and rightfully can.
• Switch to cloud-based compliance software: Switching to cloud-based compliance software like Clear will help you and your team reduce errors, improve compliance and free up your finance team from redundant tasks. It's time to leave behind outdated practices and move into a more streamlined, efficient workflow.