The government, in relief to Goods and Services Tax (GST) payers, seems to have revised the rules of Central GST (CGST), permitting the recipients of goods and services up to two months to accept or reject a credit note and adjust the Input tax credit as per that.
The taxpayers currently using the Invoice Management System (IMS) should accept or reject credit notes outright, restricting flexibility. The motive of the proposed amendment is to simplify compliance and lessen the financial stress on the businesses.
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Understanding the Impact of Key Changes
By a seller to a buyer, a credit note has been issued in the cases of sales return, discounts or overbilling, helping adjust the buyer’s payable amount. As per the amended rules-
- The taxpayers could maintain a credit note pending for one tax period (one month).
- Taxpayers can get an additional month to decide if the tax return gets delayed.
- No action will be permitted past two months.
As per an official, it mentioned that, “The recipient will have the option to keep the credit note pending for a month. If the return filing is delayed, another month will be available. However, beyond this, no further extensions will be provided.”
Push Towards Obligatory IMS Adoption
IMS, which is said to be the automated system to monitor GST invoices and support businesses in claiming the ITC, was started in October 2024. At present, it is not obligatory, but the government is making it a significant portion of GST compliance.
The forthcoming CGST rule amends the alignment with the Finance Bill, 2025, which proposes making the suppliers obligated to ensure the ITC reversal via the receiver to reduce their tax obligation.
Analyzing Industry Response and Identifying Key Challenges
As per the tax experts, this procedure will affect 15 million GST taxpayers, including both large and small businesses, as credit notes are a key component of IMS.
The amendment, though, comes with an issue. The receiver needs to file the interest for the one-month delay if they accept the credit note in the next tax period rather than the same month.
Businesses need to adjust their cash flow management and ITC planning to avoid additional financial burdens, experts caution, as this move improves flexibility.
Since the GST framework is successively evolving, the taxpayer must stay updated on the statutory amendments and prepare for an obligatory IMS rollout in the forthcoming time.
