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For companies dealing with GST obligations, managing input tax credit (ITC) can be a cumbersome issue. Conflicts with subcontractors dealing with unclaimed credits, invoices that do not match, and the endless cycle of reconciling with suppliers adds undue pressure. Businesses face cash flow difficulties and ITC claim disruptions due to incorrect ITC claims. Invoice Management Systems (IMS) were designed precisely for this reason; to assist businesses in managing ITC claims with ease, whether they decide to accept, reject, or push invoices to the waiting list.
Now let’s review how it operates and gives value to your business in the context of your Invoice Management System cycle.
IMS enables buyers to accept, deny, and put on hold invoices received from suppliers. What is the importance of this? You always have an option to cross-check applicable ITC and match supplier invoices with your records to mitigate problems by utilizing IMS in your business. This directs more accurate returns and more efficiency driven processes. The IMS enables suppliers and buyers to interact on the issues of invoice reconciliation in a pre-defined manner.
1. Supplier submits invoices via GSTR-1 or IFF
Suppliers can submit their outward supply invoices through GSTR-1 (on or before the 11th day of every month) or via IFF.
2. Invoices visibility on IMS dashboard
Immediately after the supplier uploads the invoices, all invoices reported by the respective suppliers are available to buyers on IMS dashboard. Some of the key details that are visible in the dashboard are Supplier GSTIN, trade name, invoice number, invoice type.
3. Buyers actions on invoices
Before GSTR-2B is generated, i.e. by the 14th of the month following the return period, buyers can take action on all invoices which include Accept, Reject, and Pending.
When invoice details are correct, the invoice will be included in the auto drafted GSTR-2B which is generated on the 14th of every month, and the ITC from these invoices will be part of GSTR-3B.
In the case of incorrect or invalid invoice which goes complete blackout on 30 days ITT time and on-demand ITC snapshot after submission, the invoice will be rejected and all rejected invoices will be captured under ITC rejected in GSTR-2B, and these invoices will not be part of ITC computation in GSTR-3B.
Pending invoices are for goods or services not received, or are ambiguous in terms of ITC eligibility.
Excluding all invoices under GSTR-2B and GSTR-3B, there will be no action required therefore, invoices will be carried forward for action in the next month’s cycle.
4. No Action Taken?
Without any actions being taken on the invoice by the buyer, the invoices will automatically be captured in GSTR-2B, and GSTR-3B for ITC computation and will be considered ‘Deemed Accepted’.
5. Changes After the 14th
Regardless of whether any action has been taken (Accept/Reject/Pending) post the GSTR-2B generation (14th) but pre GSTR-3B filing, in such cases, the recomputation of GSTR-2B is mandatory for all buyers. Only after fresh computation will the filing of GSTR-3B return be permissible. Would you like me to go over any concepts before we continue?
Quick Snapshot of IMS actions on GSTR-2B and GSTR-3B
Buyer action | Impact on GSTR-2B | Impact on GSTR-3B (ITC) | Supplier visibility |
Accepted invoices | Reflected in GSTR-2B generated on 14th | included in ITC computation | Notified as accepted |
No action taken (Deemed accepted) | Automatically added to GSTR-2B | Included in ITC computation | Notified as accepted |
Rejected invoices | Shown under ITC Rejected section | Excluded from ITC computation | Visible on supplier’s IMS dashboard |
Pending invoices | Not included in current month’s GSTR-2B | Not included until final action | Notified once action is taken |
The IMS offers tangible benefits for both buyers and suppliers:
For Buyers | For Suppliers |
Control over ITC claims | Visibility of invoice acceptance/rejection |
Avoid wrongful ITC claims | Early detection of discrepancies |
Simplified reconciliation | Faster resolution of mismatches |
Better audit readiness | Smoother cash flow through accurate filings |
Where Pending Becomes Useful
The invoice as pending ought to be marked in the previously listed situations to prevent incorrect ITC claims.
For lapsed invoices, the same will continue showing till dealt on a month-on-month basis. In all such, however, the ITC must be claimed by the buyer before the set deadline — before the year ending December 31st of the subsequent FIN year — as per Section 16(4) of CGST Act.
Claiming business expenses don’t stop. This legally allowed inline refunding spending tax of pre incurred activity expenses is known ITC.
Not an additional step of compliance, the invoice management system technology helps eliminate ITC control issues enabling businesses to take charge of their ITC smoother workflows, calmer ITC processes and disputes. But gets rid of ample errors even with pending reconciliation and significantly prevents late credible disputes. Whether it’s plug vendor falls effect extending unintended wrongful ITC, remain audit ready and claim control, sqlalchemy integrate effortlessly provides clarity to the elusive system.
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