The Karnataka State Chartered Accountants Association (KSCAA) has submitted a representation to the Chairman of the Central Board of Indirect Taxes & Customs, Shri Sanjay Kumar Agarwal, detailing various issues faced by taxpayers with the Invoice Management System (IMS) under GST. While acknowledging the government’s efforts in digital compliance, KSCAA highlights several practical implementation challenges impacting simplicity, equity, and efficiency.
The Karnataka State Chartered Accountants Association (KSCAA) has submitted a representation to the Chairman of the Central Board of Indirect Taxes & Customs, Shri Sanjay Kumar Agarwal, detailing various issues faced by taxpayers with the Invoice Management System (IMS) under GST. While acknowledging the government's efforts in digital compliance, KSCAA highlights several practical implementation challenges impacting simplicity, equity, and efficiency.
For recipients of goods/services, key difficulties include the inability of GSTR-3B to permit negative entries for credit notes related to ineligible Input Tax Credit (ITC), leading to double reversals or misrepresentation. They also note the absence of a government utility for bulk actions on invoices, forcing reliance on third-party software, and the premature visibility of current month's invoices in IMS, causing confusion for ITC eligibility.
From the supplier's perspective, a mismatch occurs when both an erroneous invoice and its corresponding credit note are rejected in IMS, artificially inflating the supplier's net outward tax liability. KSCAA also expresses concern over the increasing layers of compliance, urging a more proportionate and trust-based framework, possibly with optional or relaxed IMS requirements for Small and Medium Enterprises (SMEs). Finally, the representation points out the lack of clear legal backing and defined consequences for actions taken within IMS (Accept, Reject, Hold). KSCAA urges clarification and rectification of these issues to streamline GST compliance.
Karnataka State Chartered Accountants Association (R)
To,
Shri Sanjay Kumar Agarwal
Chairman, Central Board of Indirect Taxes & Customs
Date: 28th June 2025
Ref No: 21/2025-26
SUBJECT: REPRESENTATION ON VARIOUS ISSUES FACED BY TAXPAYERS WITH RESPECT TO INVOICE MANAGEMENT SYSTEM (IMS)
The Karnataka State Chartered Accountants Association (R) (in short 'KSCAA'), established in 1957, is a premier association representing the Chartered Accountancy profession in Karnataka with prime focus on upholding professional ethics and advancing the interests of the business community. KSCAA has consistently contributed to the community through seminars, workshops, representations, and consultations on policy matters impacting trade, commerce, and industry.
While we acknowledge and appreciate the government's continued efforts in improving GST compliance mechanisms through digital tools, we take this opportunity to bring to your kind attention several genuine implementation-level issues being encountered with IMS. We believe these concerns merit timely clarification and rectification to preserve the core objectives of the GST regime — simplicity, equity, and efficiency.
KEY ISSUES AND SUGGESTED CLARIFICATIONS
1. From the perspective of recipient of goods/ services
We would like to bring to your kind attention the following difficulties faced by recipients of goods/ services with respect to IMS:
a. Credit Notes for Ineligible Input Tax Credit – GSTR-3B Does Not Permit Negative Entry in Table 4B(1)
Under the current mechanism, taxpayers are expected to accept invoices with ineligible input tax credit and subsequently reverse the ITC under Table 4B(1) of Form GSTR 3B.
However, where a credit note is issued in respect of such blocked input tax credit, the system does not permit a negative entry in Table 4B(1) of the Form GSTR 3B. This leaves taxpayers with only two incorrect options:
- Accept and reverse the original input tax credit again (double reversal), or
- Reject the invoice entirely (which misrepresents the transaction trail)
Illustrative example for ease of understanding:
A taxpayer receives an invoice for ₹10,000 + ₹1,800 GST towards services blocked under Section 17(5) (e.g., Employee Insurance). The taxpayer correctly accepts the invoice in IMS and reverses the ₹1,800 ITC under Table 4B(1).
Subsequently in the next month, a credit note of ₹1,500 + 270 (GST) is issued to reduce the value of the transaction. Ideally, the reversal under Table 4B(1) should now be adjusted downward by ₹270 (assuming there are no other ineligible inputs), but the portal does not allow a negative entry, creating a mismatch.
Our suggestion:
A clear advisory is needed on how to treat such credit notes. Alternatively, the GST portal may be enhanced to permit negative entries in Table 4B(1) of Form GSTR 3B for genuine reversal of blocked credits through credit notes.
b. No Government Utility for Bulk Actions — Over-Reliance on Third-Party Software
Currently, only taxpayers with fewer than 500 invoices can view their full invoice list on the portal. Taxpayers with more than 500 invoices are unable to view a complete list on the portal, and action (accept/reject/hold) can be taken only by searching for individual invoices, which is highly impractical.
In the absence of a bulk action utility or download feature, taxpayers — especially mid- to large-sized businesses — are compelled to rely on third-party software, increasing cost, effort, and data security risk.
Our Suggestion:
We request the urgent release of a bulk action utility or importable excel format, enabling authorized users to view and take action across all invoices seamlessly within the portal environment.
c. Invoice of running month visible even though they are not eligible for ITC
At present, invoices pertaining to the current month (i.e., the tax period in which the return is being filed) are also being displayed on the IMS portal. However, these invoices are not yet eligible for input tax credit for the return currently due, leading to confusion for taxpayers during reconciliation.
This premature visibility creates a risk of incorrect credit being claimed, especially for taxpayers who rely on portal data to finalize their returns. It also undermines the intent of IMS as a workflow and validation tool tied to actual return periods.
Our Suggestion:
We recommend that the portal logic be modified such that only those invoices that are eligible for ITC in the relevant return period are displayed in IMS. Alternatively, the portal may provide a filter or indicator to segregate invoices pertaining to future periods that are not yet claimable.
2. From the perspective of supplier of goods/ services
a. Mismatch in Treatment When Both Invoice and Credit Note Are Rejected
In many practical cases, suppliers issue a credit note to reverse a wrongly issued invoice (e.g., due to wrong GSTIN or wrong party). A new invoice is then raised to the correct recipient.
However, when the original recipient rejects both the erroneous invoice and the related credit note in IMS, the portal presently adds back only the credit note value to outward supplies. The corresponding invoice value is not considered, thereby inflating the net outward tax liability of the supplier inaccurately.
Our Suggestion
The system must be revised to ensure that where both invoice and corresponding credit note are rejected, the two are netted off appropriately, and the supplier's outward supply is not artificially inflated.
3. Concern Over Layered Compliance – Need for Proportionality and Trust-Based Design
We respectfully urge that the progressive addition of compliance layers— from GSTR-2A to GSTR-2B and now IMS — are resulting in a significant compliance burden on taxpayers, particularly small and medium enterprises (SMEs). While we fully support the government's objective of curbing tax leakage, this must be balanced with logical prudence and broader commitment to the Ease of Doing Business framework.
The current trend of introducing multiple validation mechanisms for availing input tax credit may prove counterproductive, leading to confusion, duplication of efforts, and growing dependency on external software.
We urge the Ministry to consider a trust-based, proportionate compliance framework — one that acknowledges that the majority of taxpayers are honest and willing to comply. In this regard, we recommend that:
- Multi-layered compliance requirements such as IMS be made optional or relaxed for SMEs, and
- A simplified approach be considered for businesses below a certain turnover threshold, in alignment with the government's policy commitments.
4. Lack of Legal Backing and Clarity on Consequences of Actions in IMS
The IMS currently allows recipients to Accept, Reject, or Keep invoices on Hold; however, there is no statutory provision or official guidance that clearly defines the legal implications of these actions.
Conclusion
In light of the above, we respectfully submit that the implementation of the Invoice Management System (IMS), while well-intentioned, currently suffers from a number of technological and practical limitations. These issues are not merely technical in nature but significantly impact the ability of taxpayers — especially small and medium enterprises — to comply effectively and accurately with GST requirements.
Considering the difficulties encountered, we, the members of the Karnataka State Chartered Accountants Association, respectfully urge you to consider our request on behalf of the entire Chartered Accountants community and the trade and industry in Karnataka. We remain available for any further discussions or consultations on these matters and are committed to supporting the authorities in streamlining the GST framework.
Yours sincerely,
For Karnataka State Chartered Accountants Association ®
CA Vijaykumar M Patel
President
Representation Committee
CA Praveen S Shatter
Secretary
CA Babitha G
Chairperson,