The Invoice Management System: how IMS changed the ITC dispute
Since October 2024 credit is not merely reported, it is accepted. An acceptance is a statement, and a statement has consequences.
The Invoice Management System, available on the common portal from October 2024, requires a recipient to take an action on each inward invoice — accept, reject, or keep pending — and the GSTR-2B is generated from those actions. An accepted invoice flows into GSTR-2B and into the credit claim. A rejected invoice does not, and the rejection is visible to the supplier. Pending is available for a limited period. The change moves the mismatch dispute from the audit stage to the filing stage, and it creates a record of the recipient's own position on every invoice.
What the mechanism does
Invoices reported by suppliers appear in the recipient's IMS dashboard. The recipient acts on each. No action is treated as deemed acceptance, and the invoice flows into GSTR-2B.
Rejection removes the invoice from GSTR-2B and communicates the rejection to the supplier, who may amend or issue a credit note.
Pending defers the invoice for a permitted period, and the facility has been extended to specified categories of documents. Once the period lapses the option ceases.
Credit notes are also actioned, and rejecting a credit note has an output consequence for the supplier, which is why the rejection of credit notes has become a point of commercial friction.
The disputes this will generate
Deemed acceptance. Where no action is taken and an invoice enters GSTR-2B, the department will say the recipient accepted the invoice. In a later dispute about whether the supply occurred, that acceptance will be put to the taxpayer. Inaction is now a statement.
Rejection as an admission. A rejection recorded and later reversed will be used to suggest that the recipient itself doubted the transaction. Rejections should therefore be made for stated reasons recorded internally.
Pending as a compliance failure. Keeping an invoice pending past the permitted period, and then finding the credit unavailable, will produce Section 16(4) arguments.
Credit note rejection. Where a recipient rejects a credit note to protect its credit, the supplier's output liability is affected and a commercial dispute follows. The contract should say who decides.
The control the system now requires
IMS action must be a monthly process with a named owner and a documented basis. Accepting everything by inaction defeats the purpose and creates evidence against you.
A rejection log with reasons — invoice not ours, goods not received, value disputed, duplicate — is the single most useful new document in a GST file. It is contemporaneous evidence of diligence.
The reconciliation moves earlier. Because GSTR-2B is now a product of your own actions, the discrepancy must be resolved before filing, not in an annual reconciliation.
Vendor communication must change. A rejection is visible to the supplier and should be preceded or accompanied by a message, or the commercial relationship absorbs the friction instead of the process.
What to do on Monday
Assign a named owner for IMS action with a monthly cut off before the GSTR-3B filing date.
Maintain a rejection log with a stated reason for every rejected document; it is contemporaneous evidence you will want in year four.
Move the purchase reconciliation ahead of the filing date, because GSTR-2B is now your own output.
Add a clause to purchase terms dealing with credit notes and IMS rejections so the commercial position is agreed in advance.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Is action on every invoice mandatory?
Inaction results in deemed acceptance, so in practice the choice is between a considered action and an unconsidered one.
Does rejecting an invoice affect the supplier?
Yes. The rejection is visible and the supplier may need to amend or issue a credit note, which is why rejections should be communicated commercially as well.
Can we keep an invoice pending indefinitely?
No. The pending facility operates for a limited period and for specified categories, after which the option is no longer available.
Does IMS change the Section 16(2)(c) position?
It does not remove the condition, but it strengthens the diligence layer considerably, because your action on the invoice is recorded with a date.
Should we reject an invoice from a supplier who has not filed GSTR-3B?
Not necessarily. The invoice may be genuine and Rule 37A provides the mechanism. Rejection is for invoices you do not accept as yours.
In this cluster
- Input tax credit under GST: the complete 2026 position
- Section 16(2)(c): can your ITC be denied because the supplier did not pay tax?
- Section 16(4) time limit for claiming ITC: what survives after the amnesty
- GSTR-2A and 2B mismatch notices: how to answer without conceding
- Blocked credits under Section 17(5): the clause by clause map
- Safari Retreats: what the Supreme Court decided on ITC for construction, and what Parliament then undid
- ITC on canteen, transport, insurance and other employee benefits
- ITC reversal under Rules 42 and 43: working the formula correctly
- Rule 37: ITC reversal when you do not pay your supplier within 180 days
- Rule 37A: reversal where your supplier did not file its GSTR-3B
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.