As of October 1, 2024, the GST Invoice Management System (IMS) has been introduced to enhance the process of claiming Input Tax Credit (ITC) in GSTR-3B returns. The goal is to make the entire process more accurate, systematic, and transparent for taxpayers, reduce discrepancies, and simplify GST compliance.

Why the Change Was Needed

Previously, many taxpayers relied on GSTR-2B alone to claim ITC in their GSTR-3B filings, often without thorough reconciliation. This resulted in a higher chance of errors in reporting. IMS now requires taxpayers to carry out thorough reconciliations at the invoice level, leading to more precise ITC claims.

The Reconciliation Process

To align with the new IMS system, taxpayers need to follow a two-step reconciliation process:

  • First Reconciliation – GSTR-2B vs Books: The first step is to match the ITC reflected in your books with the ITC data in GSTR-2B.
  • Second Reconciliation – GSTR-2B vs IMS Data: The second step is to match the reconciled ITC with the data on the IMS dashboard. This ensures that the ITC claimed in GSTR-3B is valid.

This dual reconciliation process is designed to catch discrepancies and prevent incorrect ITC claims.

Real-World Example: ITC Claim Reconciliation

Let’s say you have an invoice from July 2024, and the ITC was recorded in GSTR-2B for that month. However, the actual goods were received only in October 2024, which means the ITC won’t appear in the October GSTR-2B. This situation requires first-level reconciliation to ensure accurate ITC reporting.

Step-by-Step ITC Claiming Procedure Using GST IMS

To successfully claim ITC under the new IMS process, follow these steps:

  • Log In to the GST Portal: Start by accessing the Services (Returns) section of the GST portal.
  • Accept Eligible Invoices: Review and accept invoices that meet the conditions specified under Section 16 of the CGST Act for ITC eligibility.
  • Mark Ineligible Invoices as Pending: For invoices that don’t qualify for ITC, mark them as pending rather than rejecting them.
  • Do Not Reject Invoices: Rejecting invoices will make their ITC invalid for future claims, so always keep such invoices pending for later review.

How to File GSTR-3B with GST IMS?

After completing the reconciliation steps, follow these instructions to file your GSTR-3B:

  • Compute GSTR-2B: On the IMS dashboard, click on Compute GSTR-2B. This will transfer all the invoice data to your GSTR-3B return.
  • Handle Debit and Credit Notes: Debit and credit notes need to be either accepted or rejected—marking them as pending is not an option.
  • Return Dashboard: Go to the Return Dashboard, select the relevant filing period, and input the necessary figures.
  • Submit GSTR-3B: Once the data is filled, proceed with the usual steps to file the GSTR-3B.

Key Considerations for ITC Claims

  • Mark as Pending, Not Reject: For any invoices that don’t meet ITC eligibility, mark them as pending instead of rejecting them.
  • Be Cautious with Accepting Invoices: Be diligent in accepting invoices. Only accept those that are eligible to avoid penalties or interest.
  • Timely Action is Crucial: Ensure that you act promptly on invoices to avoid auto-population of incorrect ITC in GSTR-3B.
  • Supplier Communication: Use the “Communicate with Taxpayer” feature to alert suppliers about missing invoices.
  • IMS for Reconciliation: Rely on IMS to assist you in achieving accurate and complete reconciliation.

Final Thoughts: Enhancing ITC Claims with IMS

The introduction of the IMS system marks a significant shift in the GST landscape, making ITC reconciliation more robust and accurate. While it may seem like a step up in workload, the long-term benefits—such as reduced errors, minimized notices, and better compliance, make it worth the effort.

By ensuring more rigorous reconciliation, IMS is helping taxpayers and authorities alike. For taxpayers, it means a more reliable and compliant process for claiming ITC, while for authorities, it creates a system that encourages transparency and reduces litigation.

With the IMS framework, GST filings will be easier, more accurate, and more efficient.