Budget 2025: GST Framework To Be Tightened with Invoice Management System to account fake invoicing

The finance bill 2025-26, which will be presented in the budget session, is going to see considerable amendments in the Goods and Services Tax Act. Sources said these amendments would include IMS in the legal framework to address tax evasion and revenue loss on account of fake invoicing.

Recently, the GST portal added an optional feature known as the IMS in November 2024. With it, the taxpayer can view the real-time status of the invoices presented as payable or due in terms of being paid or pending. The new system was incorporated to work towards reducing errors and notices issued for ITC mismatches in GST returns. Official sources have revealed that the change received accolades since its launch.

Although IMS is not yet a part of the GST rule books, the proposed amendments will formally integrate it into the GST Act. This will remove any legal doubts about its implementation. Along with these changes, updates to the Central Goods and Services Tax (CGST) Rules, 2017, are also in the pipeline to ensure smooth adoption and effective execution.

The manual uploading of invoices, under the GST compliance system followed so far, has been found to be replete with issues of delay and data mismatches and errors. In addition, fraudulent invoices most of the time get unnoticed until return filing is complete, leading to huge revenue erosion. IMS shall address these challenges by allowing immediate validation of uploaded invoices, identifying mismatches instantaneously.

IMS aims to prevent the misuse of fake invoices by automating invoice validation and ensuring discrepancies are flagged before ITC claims are made. Misuse of fake invoices has been a long-standing issue; such practices lead to substantial revenue leakages. In two special drives carried out in 2024, the government detected GST evasion of Rs. 19,500 crore in the first drive and Rs. 26,543 crore in the second.

Role of IMS in Tackling Fraud

The role of IMS in curbing the issue of fake invoices will be key as it will ensure that invoices get automatically reflected in GST returns, and cross-checking of the supplier and recipient details will be in real time. This will avoid fraudulent ITC claims and flag mismatches before causing revenue loss.

Officials believe that the automatic population of invoices into relevant GST returns under IMS will make compliance easier, reduce errors, and eliminate reconciliation and amendments in subsequent returns. Moreover, integration of IMS with GST compliance mechanisms will increase transparency and reduce cases of tax evasion.

Recommendations by the GST Council

The 55th GST Council meeting had proposed changes to the CGST Act and Rules that would enable IMS integration. These amendments will ensure that the process of generating FORM GSTR-2B will be provided with a legal framework, as well as streamlining ITC procedures. It is the expectation of the government that the amendment would lead to effective compliance and eliminate long-standing problems with the present GST regime.

The government would expect that the addition of IMS to GST Act formally consolidates the tax system, reduces leakages in revenues, and improves transparency, thereby making fraudulent practices more difficult to flourish. It is seen as a very positive step toward strengthening the efficiency of India’s tax compliance framework.