A Landmark Upgrade in Accuracy, Audit Clarity & Dispute Resolution
Effective from: October 2025 Tax Period
The Invoice Management System (IMS), launched on 14 October 2024 was designed to help taxpayers review supplier-reported invoices and align Input Tax Credit (ITC) claims in GSTR-2B.
While revolutionary, the first version had two major limitations:
-
Credit Notes could not be kept pending for verification or dispute.
-
On acceptance, the system auto-reversed the entire ITC, even if only partly availed or already reversed in GSTR-3B.
To correct these inefficiencies, GSTN has rolled out IMS 2.0 — introducing:
- a “Pending” option for Credit Notes, and
- an ITC Reversal Declaration feature on acceptance.
Both apply prospectively from the October 2025 tax period.
Core Enhancements at a Glance
| Feature | Earlier System | New System (Oct 2025) |
|---|---|---|
| Pending Option | Only invoices / debit notes could be kept pending. | Now extended to Credit Notes and their amendments, downward amendments of Invoice / DN and ECO documents already accepted. |
| ITC Reversal Declaration | Full ITC reversed automatically on CN acceptance. | Taxpayer may declare the exact ITC to reverse — full, partial or nil. |
| Remarks Field | Optional. | Mandatory for partial or no reversal to create audit trail. |
| Pending Period | Indefinite. | Limited to one tax period (month or quarter). After expiry → Deemed Accepted. |
Applicability and Time Window
-
Prospective Effect:
CN dated 15 Sep 2025 → Old system.
CN dated 15 Oct 2025 → IMS 2.0 options apply.
| Taxpayer Type | Maximum Pending Period | Illustration |
|---|---|---|
| Monthly filer | One month | CNs in Oct GSTR-1 → Pending till 20 Dec 2025 (GSTR-3B due for Nov). |
| QRMP filer | One quarter | CNs for Oct–Dec 2025 → Pending till 22/24 Apr 2026 (GSTR-3B due for Jan–Mar 2026). |
If no action is taken within this period → record becomes deemed accepted and may trigger ITC reversal.
4. The New ITC Reversal Flow – Smart, Accurate & Auditable
When a Credit Note is accepted, IMS asks:
“Whether ITC needs to be reduced for the selected record(s)?”
| Choice | Meaning | Effect on 2B / 3B |
|---|---|---|
| ✅ Yes – Full Reversal | ITC fully reversed by system. | ↓ Full amount auto-reduced. |
| ✳️ Yes – Partial Reversal | User declares actual reversal value. | ↓ Declared amount reduced. |
| 🚫 No Reversal | No ITC claimed earlier. | No impact on ITC. |
Remarks mandatory for partial or no reversal.
Quick Compliance Matrix
| Action | System Effect | ITC in 2B | 3B Impact | Remarks |
|---|---|---|---|---|
| Accept – Full | ↓ Full Reversal | ↓ Full | ↓ Full | Optional |
| Accept – Partial | ↓ Declared Amount | ↓ Partial | ↓ Partial | ✅ Mandatory |
| Accept – No | No Reversal | Nil | Nil | ✅ Mandatory |
| Reject | Supplier liability restored | Nil | Nil | Recommended |
| Pending | Held temporarily | No change | No change | Recommended |
| No Action | Deemed Accepted | ↓ Full | ↓ Full | — |
Key Risk Alert – Inaction = Deemed Acceptance
If no decision is taken within the allowed period, the record will be auto-accepted and the system may reverse the entire ITC.
🔸 Always review the IMS dashboard before each GSTR-3B filing.
Practical Impact for Businesses
| Area | Benefit / Outcome |
|---|---|
| ITC Accuracy | Prevents over-reversal and preserves legitimate credit. |
| Dispute Management | Allows time to validate supplier credit notes. |
| Audit Transparency | Remarks serve as digital defence during scrutiny. |
| Reconciliation Efficiency | Ensures GSTR-2B mirrors book position. |
| Process Discipline | Encourages timely IMS actions and tracking. |
Recommended Compliance Practices
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Reconcile IMS before GSTR-3B filing every month.
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Maintain Pending Tracker with reasons and due dates.
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Use remarks precisely to support future audits.
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Match declared reversal with 3B Table 4B(2).
-
Train accounts teams on partial reversal and pending logic.
The October 2025 IMS upgrade marks a shift from automated compliance to intelligent compliance.
It returns control to taxpayers — allowing them to decide, declare and document each ITC reversal with accountability.
“IMS 2.0 transforms a routine click into a conscious financial decision.”
By aligning technology with commercial realities, GSTN has bridged a long-standing gap between law and practice.
The new “Pending” option and ITC Reversal Declaration are small changes with large compliance impact.
They enhance accuracy, reduce disputes, and create a transparent, audit-ready trail for each Credit Note action.
A timely and transformative step toward data-driven, trust-based GST governance.
