New GSTN Feature to Fix Errors in GST Invoice Matching for ITC Claims: Details You Should Know

The Goods and Services Tax Network (GSTN) has introduced new features and advisories in 2024-25 aimed at making Input Tax Credit (ITC) claims more accurate and easy for taxpayers.

The introduction of the Invoice Management System (IMS), Here’s a detailed look into these features and what they mean for GST-registered taxpayers.

1. Introduction of the Invoice Management System (IMS)

The GSTN introduced the Invoice Management System (IMS) on the GST portal effective from October 1, 2024. This tool allows buyers to manage invoices issued by their suppliers in real-time and prevent mismatches that could result in incorrect ITC claims.

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How IMS Works:

• Sellers upload invoices onto the GST portal, where they become available for buyers to review.
• Buyers can accept, reject, or leave these invoices pending. Once accepted, the invoice becomes eligible for ITC and appears in the buyer’s GSTR-2B form.

Advantages of IMS:

• By directly validating and managing invoices on the portal, taxpayers can avoid mismatches between ITC claims and actual invoices.
• It reduces disputes between buyers and sellers over ITC eligibility.

2. Addressing Initial Errors in the IMS System

IMS offers good benefits but GSTN has recognized errors may happen, especially during the initial phase as users get confused about the system. For example, buyers may accidentally accept or reject an invoice which would result in incorrect ITC data appearing in GSTR-3B (the form used for filing returns)

To address these issues, in an advisory dated November 12, 2024, GSTN provided a solution for taxpayers:

• Manual Adjustment: If there are mistakes in ITC details auto-populated in GSTR-3B, taxpayers are permitted to manually edit the ITC amounts before filing their GSTR-3B. This way, taxpayers can make sure they claim the accurate amount of ITC based on the actual invoices and records in their possession.

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3. Expert Recommendations for Taxpayers

Tax experts advise GST-registered taxpayers to handle IMS data carefully and take quick action to review and accept or reject invoices:

• Failing to respond to an invoice on the IMS may be interpreted as automatic acceptance, so it’s important to quickly review the information displayed in the IMS.
• Mistakes in accepting or rejecting invoices can lead to incorrect ITC entries, users are encouraged to be careful and alert when handling IMS data.
• Tax experts warn that a single error could result in financial complications as incorrect ITC details may lead to over-claimed or under-claimed credits, which could attract the attention of tax authorities.

4. Who Should Use IMS?

The IMS is for all GST-registered taxpayers, but high-volume taxpayers may particularly benefit:

• High-Volume Transactions: For businesses with a large number of transactions, IMS can simplify invoice management, improve compliance by reducing errors, and save time by automating data handling.
• Optional for Smaller Businesses: For smaller businesses with fewer transactions, the decision to use IMS may depend on whether the benefits of improved tracking and organization outweigh any added workload. These businesses can weigh IMS’s advantages against their current invoice management practices.

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5. Flexibility and Legal Implications

GSTN’s advisory gives taxpayers flexibility to correct actions on IMS such as changing a previously accepted invoice to “rejected” or vice verse until they file their GSTR-3B. This feature allows taxpayers to adjust their ITC based on accurate records and minimize potential errors.

Legal experts note that while the advisory provides useful guidance, it may not yet have complete legal backing. so, it remains uncertain if taxpayers can use it as a defense in case of audits or disputes.

6. GSTN’s Vision for IMS: Improving Compliance, Not Adding Burden

GSTN encourages taxpayers to see IMS not as an added compliance task but as a tool for accurate ITC claims and smoother business operations. This advisory period also helps users transition smoothly into a fully operational system, where the government aims to focus on accuracy and transparency in GST compliance.

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By introducing IMS, GSTN is committed to reducing the tax compliance burden and supporting taxpayers as they adapt to this new system. With careful management and quick action, taxpayers can leverage IMS to improve the reliability of their ITC claims, avoid disputes, and make GST compliance easier and more effective.

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