New Delhi, Jan 17 (Mayank Nigam) IndusLaw, a law firm, has asked the government that it should ensure that it provides sufficient time for implementation for the Invoice Management System (IMS) due to significant technological challenges being faced by MSME retailers. While the introduction of IMS was designed to strengthen the Goods and Service Tax (GST) compliance process, several unresolved technical and operational issues have risked undermining its successful rollout among small sellers and are posing several challenges, according to IndusLaw, India’s top law firm. The GST Network (GSTN) issued an advisory on 3 September 2024 to introduce the IMS functionality on the GST portal from 1 October 2024 onwards.
The introduction of the IMS was expected to facilitate transparency between recipients and suppliers and streamline the reconciliation of Input Tax Credit (ITC), which has been a challenging process since the introduction of GST, IndusLaw said in a statement. Post the initial rollout of the IMS, the API versions for recipient side were released only in mid-October. The government’s efforts to streamline compliance through IMS have left small businesses with insufficient preparation time. This narrow window has left MSMEs struggling to implement essential changes, including modifications to accounting software, overhauls of Accounts Payable (AP) modules, and updates to technological infrastructure. Commenting on the challenges faces by MSME retailers, Shashi Mathews, Partner, IndusLaw, stated, “Unlike earlier GST reforms, such as e-invoicing, which were introduced gradually over several months or years, the accelerated timeline for IMS does not provide businesses the necessary time to adapt.
Therefore, we recommend either extending the implementation timeline or addressing these technical gaps to ensure that businesses, particularly those with high transaction volumes, can comply without undue hardship. A phased rollout would allow for smoother adoption and maximize the benefits of IMS.” Another significant challenge being highlighted is the delay in release of APIs for the supplier dashboard limiting the ability of businesses to view actions taken by their customers on IMS. Without robust technological infrastructure, even businesses ready to comply with IMS face operational roadblocks. Additionally, for MSMEs with high transaction volumes, the lack of an offline utility or bulk-upload facility adds to the complexity. Manual reconciliation of records for each document on the portal is impractical and time-consuming, particularly for large businesses. This absence of user-friendly tools makes compliance a significant operational burden. The current framework also imposes unreasonably tight timelines for resolving invoice discrepancies, including rejections, cancellations, or corrections. In industries such as e-commerce, where disputes often arise after delivery, this narrow window makes compliance nearly impossible.
Real-time interactions between suppliers and recipients, as required by IMS, are unfeasible without substantial investments in technology and manpower to bridge communication gaps. This would not only pose compliance related challenges; it poses the risk of blocked cashflow for smaller businesses due to pending actions on IMS. The launch of the IMS honors a pivotal point for GST compliance in India. With components that facilitate the invoice reconciliation process, decrease errors, and enhance ITC accuracy, IMS is set to become an essential tool for businesses of all proportions. While IMS facilitates many elements of GST compliance, the initial investment needed for upgrading systems for the transition, mainly for small businesses familiarized with older methods may be a challenge. Therefore, solving technological issues along with sufficient transition time and industry consultation is crucial for successful IMS implementation.