How to Reclaim GST ITC on Rejected Invoices and Credit Notes in IMS:

How to Reclaim GST ITC on Rejected Invoices and Credit Notes in IMS The taxpayers can now have a better visibility and control over their Input Tax Credit (ITC) after the launch of the Input Services Matching (IMS) system under GST. Still, there are certain problems which can occur when documents like invoices, debit notes, ECO-documents or credit notes are accidentally rejected. Let us know how recipients and suppliers can correct such issues and make sure ITC is claimed in proper way or reversed.

Fixing Rejected Invoices, Debit Notes or ECO-Documents

If the GSTR-3B for that tax period is already filed and an invoice, debit note or Eco-document is rejected wrongly in IMS then the recipient can still claim ITC. The supplier has to re-report the same document without making any changes either in:

• GSTR-1A of the same return period or
• The amendment table of GSTR-1 or IFF in a later return period

The recipient must accept this document in IMS and recalculate GSTR-2B, after the supplier re-reports it. After this process is done, the recipient will again be eligible for the full ITC. ITC will appear only in the GSTR-2B of the period in which the document is reported again.

No Extra Tax for Suppliers When Re-Reporting

There will be no increase in tax liability for the supplier if the document was wrongly rejected by the recipient when the supplier reports it again using the same value. This is because:

• The same value is reported same through GSTR-1A or an amendment in the return which supplier submitted again.
• The system considers the difference (delta value), which in this case is zero.

So, the supplier's total tax remains same, and double taxation takes place.

Reversing ITC for Rejected Credit Notes

If a supplier's credit note is wrongly rejected and GSTR-3B has already been filed, the recipient must ask the supplier to give him the same credit note again. This can be done through:

• GSTR-1A of the same return period, or
• Amendment table in GSTR-1 or IFF of a later period

After the credit note is accepted again on IMS and GSTR-2B is recalculated, the ITC will be decreased by the full amount of the credit note.

Supplier’s Tax Liability on Rejected Credit Notes

At starting, when a credit note is rejected in IMS, the supplier's liability increases. But when the same credit note is furnished again, the liability is reduced back. Which means that the net tax effect happens only once and there is no additional tax burden on the supplier.

Quick Summary of Actions and Outcomes

Case	Action by Supplier	Action by Recipient	Effect on ITC or Tax Liability
Rejected Invoice or Debit Note	Re-report in GSTR-1A or amend in later period	Accept and recompute GSTR-2B	Full ITC becomes available again
Rejected Credit Note	Re-report the same Credit Note	Accept and recompute GSTR-2B	Full ITC is reversed
Supplier’s Tax Liability	Same value re-reported (no changes)	–	No extra tax liability (no double tax)

The IMS system provides a proper and clear structured way to solve the wrongly rejected documents. By following these easy steps, both suppliers and recipients can make sure that eligible ITC is claimed or reversed properly and that tax liabilities stay correct and fair.