IMS rollout could curtail festive sales opportunity for retailers: Empower India
The primary objective of the IMS is to streamline the input tax credit (ITC) claim process. However, according to Empower India, the lack of preparation will not only increase the compliance burden but also impede the efficient deployment of the capital
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Ahead of the festive season in the country, Empower India, a think tank, has suggested deferring the introduction of the Invoice Management System (IMS), likely to be launched on 1 October 2024.
The primary objective of the IMS is to streamline the input tax credit (ITC) claim process. However, according to Empower India, the lack of preparation will not only increase the compliance burden but also impede the efficient deployment of the capital.
Under the new system, the recipient taxpayer will be required to accept or reject every invoice or credit note or keep it pending instead of the current system where businesses can simply claim ITC on their own.
The think tank added that the lack of legal backing for the IMS, proposal is a key concern as taxpayers are currently doing self-assessments and claiming ITC in their GST returns.
The Goods and Services Tax Network (GSTN) has proposed to launch the IMS on 1 October 2024.
K Giri Director General, Empower India said, "It is prudent to defer the introduction of the IMS as it could impact the retail ecosystem during the festive season when they conclude 30-35% of their yearly sales. Also for the retail ecosystem, a new guideline to be followed in the middle of a busy sales period is an unwarranted distraction. The lack of a functional supplier dashboard, which would provide visibility on recipient actions, further complicates the implementation".
As per Empower India's suggestions, consultations with small businesses and with the last retailer are paramount. The think tank mentioned some of the suggestions by taxpayers such as allowing credit notes to be kept pending, providing sufficient time for alignment before automatic addition of tax liability, and enabling suppliers to issue debit notes to offset rejected credit notes.
"The current proposal lacks a clear mechanism for suppliers to dispute any incorrect or mischievous rejection of credit notes by their customers," Empower India added.
The think tank said that companies are already handling major GST change by way of Input Service distribution becoming mandatory from the next fiscal year, and the unannounced change complicates the compliance process.
"Business should be allowed at least 12 months to prepare for the implementation of IMS," Empower India said.
