Retailers Fear Festive Sales Disruption Due To 1 Oct IMS Rollout, Seek Delay

The Goods and Services Tax Network (GSTN) is set to introduce the Invoice Management System (IMS) from 1 October 2024, aimed at streamlining the input tax credit (ITC) process. However, industry group Empower India has raised concerns that the implementation of IMS during the crucial festive sales period could disrupt the retail sector, which typically generates 30-35 per cent of its annual sales during this time.

Under the proposed IMS, businesses will need to accept, reject, or keep pending every invoice or credit note. Currently, companies can claim ITC on their own through self-assessment in their GST returns. The IMS is designed to allow registered taxpayers to match their records with invoices filed by suppliers in GSTR-1. However, the absence of a legal framework for this new system, combined with the lack of preparation, has prompted calls for a 12-month extension before its implementation.

K Giri, Director General of Empower India, voiced the industry's concerns: "Deferring the introduction of IMS is crucial, as it could impact the retail ecosystem during the festive season. Rolling out new guidelines in the midst of peak sales is an unwarranted distraction, particularly when 30-35 per cent of yearly sales occur in this period. The lack of a functional supplier dashboard further complicates the situation."

Key concerns and recommendations for the IMS implementation include calls for improvement in the system by integrating GSTR-1 and GSTR-3B filing statuses for suppliers and enabling data validation at the invoice level rather than the rate level.

One of the major concerns is the management of credit notes, as rejections by customers could lead to increased tax liabilities for suppliers. Empower India also emphasised the need for consulting small businesses to ensure smooth IMS implementation, as the new system will affect the entire supply chain. Additional recommendations from taxpayers include allowing credit notes to be kept pending longer before tax liabilities

The business community has urged the government to address these issues collaboratively, highlighting that the industry is already grappling with other major GST changes, such as mandatory Input Service Distribution (ISD) from the next financial year. A 12-month grace period before the IMS rollout would help ensure a smoother transition.

Policymakers are being urged to engage closely with businesses to fine-tune the IMS proposal and avoid potential disruptions during one of the most critical periods for retailers.