“Pending” Option for credit notes & ITC reversal declaration in IMS
Introduction of “Pending” Option for Credit Notes & ITC Reversal Declaration in IMS
The GST Network (GSTN) has introduced a new update to the Invoice Management System (IMS) on the GST portal to make the handling of credit notes and Input Tax Credit (ITC) reversals more flexible and transparent.
🔹 1. What is the new “Pending” option?
Earlier, when a credit note was issued by a supplier and reflected in IMS, the recipient had to either accept or reject it in the same tax period.
Now, with this update, a third option — “Pending” — has been added.
This means:
- The recipient can now mark a credit note as “Pending” if they are not yet ready to take a decision.
- This status can be maintained for one tax period.
- It allows the buyer time to verify the reason, amount, and supporting documents related to the credit note before taking any action.
After one tax period, the taxpayer must decide to either:
- Accept the credit note → leading to a reduction of ITC; or
- Reject it → no change in ITC.
🔹 2. Why was this feature introduced?
Many businesses were facing disputes and reconciliation issues due to immediate acceptance or rejection of credit notes.
For example:
- Suppliers issued credit notes due to rate differences, discounts, or goods returns.
- Recipients needed time to verify if such credit notes were valid.
The new “Pending” option gives recipients flexibility and control to review credit notes without affecting their ITC computation immediately.
🔹 3. Changes in ITC Reversal Declaration
Along with the “Pending” option, GSTN has also improved the ITC Reversal functionality in IMS.
Earlier:
- When a credit note was accepted, the system automatically reduced the ITC for that period.
- There was no scope to modify or adjust the reversal amount in case of partial acceptance or error.
Now:
- Taxpayers can manually declare or modify the ITC reversal amount at the time of accepting a credit note.
- This is particularly helpful when the credit note value doesn’t fully match the ITC originally availed.
Example:
If the supplier issues a credit note for ₹10,000 but the recipient agrees only to ₹6,000, the recipient can accept the note and reverse only ₹6,000 of ITC instead of the entire amount.
🔹 4. Benefits of the New Functionality
✅ More Time to Review: Recipients get one tax period to verify and take a call on each credit note.
✅ Flexibility in Reversal: ITC reversal can be adjusted accurately based on acceptance amount.
✅ Reduced Disputes: Minimizes supplier-recipient disagreements over incorrect or premature reversals.
✅ Improved Data Accuracy: Enhances the reliability of IMS data for both taxpayers and the GST department.
🔹 5. Practical Impact
- Businesses should regularly review the IMS dashboard to track “Pending” credit notes and update their decisions within the next tax period.
- Accounting and reconciliation teams should adjust their internal approval workflows to include this “Pending” phase.
- It will help in smoother reconciliation of GSTR-2B and GSTR-3B, reducing mismatch notices and compliance burden.
🔹 6. Reference
The GSTN has also published FAQs on this new feature to help taxpayers understand its usage and implications. Taxpayers are encouraged to read these for practical guidance.
🧩 Summary
| Feature | Earlier System | New System (Oct 2025) |
|---|---|---|
| Credit Note Action | Only “Accept” or “Reject” | “Accept”, “Reject”, or “Pending” (for 1 tax period) |
| ITC Reversal | Auto reversal on acceptance | Taxpayer can modify reversal amount |
| Benefit | Limited flexibility | Better control, accuracy, and dispute resolution |
Also Read: Recommendations of the 56th Meeting of the GST Council – CA Cult
CA Cult YouTube: Calculation of Income Tax FY 2024-25 | Old vs New Regime | For Salaried Employees
