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A Complete Guide to GST Invoice Management System (IMS) and ITC Reduction in Tally Prime 7

Posted by Asok K Nadhani on

Last Updated on: 10th February 2026, 01:06 pm

GST Invoice Management System (IMS) and ITC Reduction in Tally Prime 7

GST Invoice Management System (IMS) and ITC Reduction – Overview

The Invoice Management System (IMS) in Tally prime, is a tool on the GST portal that allows recipient taxpayers to manage invoices uploaded by suppliers in real-time. it enables buyers to Accept, Reject, or mark Invoices as Pending before their GSTR-2B is generated.

ITC feature is new enhancements in Invoice Management System in Tally prime, release 7.  It offers facilities to manually adjust the Declared ITC value per invoice to ensure compliance and precise tracking.

GST Invoice Management System (IMS) & ITC Reduction in Tally Prime – Key Features

  • Actionable Control over ITC: Buyers can now manage their Input Tax Credit (ITC) by filtering invoices. ‘Accepted’ invoices flow into GSTR-2B for claiming ITC, ‘Rejected’ invoices are excluded from ITC computation, and ‘Pending’ invoices are carried forward to future periods.
  • Deemed Acceptance: If no action is taken on an invoice by the time GSTR-2B is generated, the system treats it as “Deemed Accepted,” and it is automatically included in the ITC calculation.
  • Real-time Visibility and Portal Sync: Unlike GSTR-2B, which is static until recomputed, IMS provides real-time visibility into supplier filings (GSTR-1/IFF). TallyPrime facilitates a connected environment to sync these actions directly with the GST portal via API.
  • ITC Reduction and Precise Tracking (Release 7.0): A major enhancement in TallyPrime 7 is the ability to formally record ITC Reduction for specific amendment scenarios (e.g., B2BA, CDNRA). This allows users to manually adjust the Declared ITC value per invoice to ensure compliance and precise tracking.
  • Comprehensive Reporting: IMS specific exclusive reports like the IMS Inward Supplies Report  and ITC Summary, consolidating data into Available, Pending, and Rejected ITC, simplifies GST and ITC related work.
  • Reduced Reconciliation Effort: By automating the matching of portal data with book entries, the system minimizes manual reconciliation errors, reduces audit risks, and streamlines the preparation of annual returns.
GST IMS & Invoice Reduction in Tally Prime

GST IMS & Invoice Reduction in Tally Prime

Operational Workflow : Implementing IMS in TallyPrime

This workflow outlines how an organisation can implement and use the IMS features in TallyPrime

Step 1: Initial Setup and Connectivity

  • Enable API Access: Log in to the GST Portal. Set Yes at My Profile > Manage API Access
  • TallyPrime Configuration: Click F11 (Features) > Enable GST (ensure GST Username is provided). Under Connected GST Details, set the mode of filing (e.g., EVC for OTP-based access).
  • Login: Select Exchange > GST Login/Logout menu to connect TallyPrime to the portal using OTP.

Step 2: Download and Review Invoices

  • Download Data: Go to Exchange > Download IMS Inward Invoices. Tally will list all pending invoices from the portal.
  • Access the Report: Click Alt+G (Go To) > Invoice Management System.
  • Reconciliation Views:
    • Reconciliation View (F7): Matches portal data with books. Invoices matching perfectly (GSTIN, taxable value, tax) may be auto-accepted.
    • Potential Matches: For minor differences (e.g., date or invoice number), click Potential Matches button to reconcile and copy document details from the portal.

Step 3: Action and ITC Reduction (Release 7.0 Highlights)

  • Set Action Status: Select invoices (individually or in bulk) and press F10 (Set Action Status) button to set action option (Accept, Reject, Pending, or No Action).
  • Record ITC Reduction (New in Release 7.0): For amended invoices or partial eligibility, select the invoice and Update Declared ITC Value. Manually adjust IGST, CGST, or SGST to reflect the correct reduced credit.
  • Add Remarks: Use Alt+W to add remarks for rejections or pending items (e.g., “Goods in transit”) for future audit clarity.

Step 4: Syncing with the GST Portal

  • Update Portal : Navigate to Exchange > Upload IMS Inward Invoices. Review the summary of Accepted, Rejected, and Pending items, then click Send Online to update the portal.
  • Recompute GSTR-2B: After uploading, if the current date is after the 14th of the month, click Recompute GSTR-2B button to check filtered ITC is reflected for GSTR-3B filing.

Step 5: Final Review and Filing

  • ITC Summary: Review the IMS – ITC Summary to see a breakdown of Available ITC (based on accepted/reduced values, Pending ITC, and Rejected ITC )
  • GSTR-3B Filing: The finalised ITC from the recomputed GSTR-2B will flow into the ITC Available section of GSTR-3B return.
IMS Operational WorkFlow

IMS Operational WorkFlow

ITC Reduction –Operational Workflow

Here we elaborate the features and exclusive steps in relation to ITC Reduction for clear understanding.

The ITC Reduction feature allows users to formally record and manage the reduction in ITC for specific inward supply amendments such as B2BA (Amended B2B invoices), CDNRA (Amended Credit/Debit Notes), B2BDNA (Amended Debit Notes), etc. It ensures that the ITC claimed in GSTR-3B exactly matches the eligible credit as per GST rules and portal data, even in case of partial eligibility.

Operational Steps for ITC Reduction

  • Access the IMS Report: Navigate to Alt+G (Go To) > IMS – Inward Supplies.
  • Download Portal Data: Use F7 (Get Invoices) to pull the latest GSTR-2B data from the GST portal into TallyPrime to see the matching status of invoices.
  • Select the Relevant Invoice: Identify the invoice that requires an adjustment (often found in the Mismatched or Missing sections) and drill down into the voucher register.
  • Update Declared ITC Value: TallyPrime 7 introduces a specific option called Update Declared ITC Value. Selecting this allows you to:
    • Manually adjust the tax values: You can edit the IGST, CGST, and SGST amounts directly on the invoice to reflect the reduced or partially eligible credit amount.
    • Add Contextual Remarks: You can record remarks (e.g., “ITC reduced due to non-payment within 180 days”) for audit clarity and future review.
  • Reporting and Compliance
    • ITC Summary Integration: The updated “reduced” value is automatically captured in the IMS – ITC Summary report under Available ITC. This consolidated figure serves as the basis for GSTR-3B claim.
    • Live Portal Sync: The adjusted declared ITC values and remarks sync back to the GST portal via API, to ensuring that books and the portal are in perfectly synced.
    • Error Prevention: This manual control minimizes the risk of claiming wrongful ITC, which could otherwise lead to legal disputes, interest, or penalties.

Key Benefits

  • Precise Tracking: It moves away from bulk reversals toward invoice-level accuracy, ensuring every credit note or amendment is handled individually.
  • Transparency: “Remarks” and “Update Declared Value” tools establish clear trail of instance of each Credits reduction element, for better reconciliation and complete reference
ITC Reduction – Operational Workflow

ITC Reduction – Operational Workflow

Handling of Invoice rejected after filing GSTR-3B

Invoice Rejected after filing GSTR -3B, cannot be re-upload or its changed. The system locks actions upon filing. Such situation should be handled in following way :

  • Action  Freeze and records Removal: Once GSTR-3B is filed, the Invoice action status (Accept, Deemed Accept, or Reject) freezes  and cannot be changed for that period. after filing, these records are removed from the IMS dashboard. Only pending records or those belonging to future tax periods remain in the system.
  • Supplier Upload: If an Invoice is rejected mistakenly and return filed, the supplier must re-upload the invoice either as a fresh invoice (or with minor amendment), in subsequent GSTR-1 filing
  • Fresh Action : When the supplier amends and resubmits the invoice in subsequent GSTR-1 filing, the modified document will appear in IMS for a fresh action, allowing to accept for ITC in the new period.
  • Supplier Mistake : If the rejection was due to mistake on part of Supplier, the rejected invoice is notified on their own IMS outward dashboard, allowing them to detect discrepancy at early stage, to resolve mismatch quickly.
  • Supplier workflow to re-upload rejected Invoice after GSTR-3B filing
    • Amend and Resubmit: The supplier can correct the invoice in their next GSTR-1 filing.
    • Upload as a Fresh Invoice: Alternatively, the supplier can issue a fresh invoice.
    • Correction Before Filing: If the supplier has saved the invoice but not yet filed their GSTR-1, they can simply tweak or modify it. This will automatically replace the previous version in IMS and reset any previous action, allowing to review it again.
  • Re-upload impact : Modified / Re-uploaded Invoice will be reflected in subsequent IMS download, and will be available for a fresh action to set the status to “Accepted” to claim the Input Tax Credit (ITC).

Impact of Supplier deleting / modifying a saved invoice

Invoice Management System (IMS) is a real-time communication tool. So, any changes made by a supplier to an invoice before filing their GSTR-1 will immediately impact the buyer’s dashboard.

If a supplier deletes a saved invoice before filing their GSTR-1, the following happens:

  • Removal from IMS: The record is completely removed from the recipient’s IMS dashboard.
  • Invoice Modification: If the supplier modifies or edits a saved invoice instead of deleting it, the modifications are automatically reflected in IMS.
  • Reset of Action Status: In case modification, any action previously taken by the buyer (such as Accept, Reject, or Pending) is automatically reset.
  • Fresh Action: The modified document will then be available for a fresh action by the buyer in their subsequent IMS download.

So, until the supplier officially files their GSTR-1 or IFF, they have the flexibility to delete or change records, which resets the buyer’s workflow for those specific invoices to ensure the final GSTR-2B is based on the most recent data.

Treatment of RCM invoices within the IMS

Reverse Charge Mechanism (RCM) invoices are treated as an exception to standard Invoice Management System (IMS) workflow, and are handled as follows:

  • Exclusion from IMS Dashboard: RCM invoices are currently not part of the IMS framework and will not appear on the IMS dashboard for action. So, IMS cannot be used to Accept, Reject, or mark RCM-related records as Pending.
  • Direct Flow to GSTR-2B: Instead of passing through the IMS for recipient intervention, RCM records flow directly into GSTR-2B. So, they remain available for tax computation in GSTR-3B without requiring a manual “Acceptance” action on the portal.
  • Outside IMS System: Because these invoices bypass the IMS, businesses must manage and reconcile RCM liabilities outside of the IMS tool, relying on their books of accounts for reporting RCM liability in GSTR-3B.

So, for any RCM-related supplies, the organisation should continue existing practice of self-assessing liability and claiming ITC based on their records.  These transactions are automatically processed by the GST portal for GSTR-2B.

Impact of pending status in GSTR-2B cycle

Marking an invoice as ‘Pending’ in the Invoice Management System (IMS) serves as a deferral mechanism, affecting the current and future GSTR-2B cycles in the following ways:

1. Immediate Exclusion and Carry Forward

When an invoice status is set to “Pending,” it is excluded from current month’s GSTR-2B andGSTR-3B. Instead, the invoice is carried forward to the next month’s tax cycle. It will continue to appear on IMS dashboard month-on-month until a definitive action, such as “Accept” or “Reject” is taken on it.

2. Impact on the Next Cycle’s GSTR-2B

  • Automatic Population: The pending invoice will be automatically populated in the next month’s IMS dashboard for review.
  • Deemed Acceptance: If the invoice remains in the “Pending” state and no further action is taken during that next cycle, the system will treat it as “Deemed Accepted. So,  it will then be automatically included in that month’s GSTR-2B and GSTR-3B for ITC computation.

3. Managing Effective Dates in TallyPrime

While marking an invoice as pending, you may enter a specific Effective Date for GSTR-2B & GSTR-3B. This allows to include a delayed or backdated invoice in a future return period without the need to revise earlier returns.

4. Statutory Time Limits

While the “Pending” status offers flexibility, it is not indefinite. Under Section 16(4) of the CGST Act, ITC must be claimed the ITC within a stipulated timeframe (normally generally by 30th November/ 31st December) following the end of the financial year. Beyond this deadline, an invoice cannot be kept pending to claim credit for that previous financial year.

5. When to Use “Pending” Status

pending status  is recommended in following instance:

  • Goods or services are yet to be received, while the invoice has been uploaded.
  • Some clarification from thesupplier is required for some discrepancies.
  • Supporting documentation is still undergoing verification.

ITC Reduction in IMS in Tally Prime 7 – Detailed Steps

The key enhancement in Release 7.0 is the ability to formally record and manage ITC reduction, directly impacting the final ITC figure in GSTR-3B.

Step 1: Download and View Invoices in IMS

  • Press Alt+G (Go To) and select IMS – Inward Supplies.
  • Press F7 (Get Invoices) to download the latest GSTR-2B data from the GST portal into TallyPrime.
  • The invoices will appear, showing the matching status (Matched, Mismatched, etc.)

Step 2: Set the Action Status

  • Drill down into any Mismatched or Missing section to view the specific invoices.
  • Select an invoice and press Alt+S (Set Status).
  • Choose the appropriate status:
    • Accepted: ITC will be claimed.6
    • Rejected: ITC will not be claimed (used for ineligible or incorrect invoices).
    • Pending: To be reviewed later.

Step 3: Record ITC Reduction (The New 7.0 Feature)

In the case of certain amendments or partial eligibility (like B2BA or CDNRA), precisely adjust the credit:

  • In the IMS – Inward Supplies report, select the relevant invoice.
  • At the option ‘Update Declared ITC Value’ (specifically added to support the ITC reduction rules), manually adjust the ITC values (IGST, CGST, SGST) in invoice to reflect the reduced or eligible credit amount as per the rule/portal.
  • Remarks (e.g., “ITC reduced due to non-payment within 180 days”) may be added to the invoice for future audit clarity.

Step 4: Review IMS – ITC Summary

Press Alt+G (Go To) and select IMS – ITC Summary, to view the report with final breakdown:

  • Available ITC: Based on invoices marked Accepted and those with the reduced/updated ITC value. This constitutes the basis for your GSTR-3B claim.
  • Pending ITC: Invoices marked Pending.
  • Rejected ITC: Invoices marked Rejected.

This summary now accurately incorporates the new ITC reduction rules and amendments, making the GSTR-3B filing much more compliant and error-free.

Handling Invoice Marked Deemed Accepted

In the Invoice Management System (IMS), invoices are marked as Deemed Accepted when no explicit action—such as Accept, Reject, or Pending—is taken by the recipient taxpayer by the time the GSTR-2B is generated (usually the 14th of the following month).

1. Automatic Integration into Returns

Invoices that fall under “Deemed Acceptance” are automatically included in  GSTR-2B and are considered for Input Tax Credit (ITC) computation in GSTR-3B, This ensures that credit on correct invoices are not lost just because of omission to take manual action.

2. Handling “Pending” Invoices

If an Invoice is previously marked as Pending to defer it, and no further action is taken during the subsequent tax cycle, it will be treated as Deemed Accepted. Consequently, will be automatically included in that month’s GSTR-2B and GSTR-3B for ITC computation.

3. Managing Risks

While “Deemed Acceptance” is helpful for correct invoices, it carries a significant risk:

  • Incorrect Credits: If a supplier uploads an incorrect (or fraudulent invoice) Invoice, and it is not marked Rejected or Pending, the system will auto-accept it.
  • Action Deadline: To avoid wrongful ITC claims, review your IMS dashboard and take corrective action (Reject or Pending) before filing GSTR-3B. Once the GSTR-3B is filed, the “Deemed Accepted” status is frozen and locked for that period.

4. Handling in TallyPrime

  • “No Action” Status: In the IMS Inward – Voucher Register, set action status to “No Action”. This ensures the invoice will be auto-accepted when GSTR-2B is generated.
  • Configuration set up: Enable the option in TallyPrime (F11 > GST) “Mark reconciled as accepted in IMS”. This automatically marks matched invoices as accepted, reducing the need to rely on “Deemed Acceptance” for reconciled records.
  • Recomputation: If action on an invoice is taken after the 14th of the month, but before filing GSTR-3B, click the ‘Recompute GSTR-2B’ button to ensure these changes (including moving away from Deemed Acceptance) are reflected in Returns.

5. Statutory Limitations

Invoices cannot be kept “Pending” in indefinite state. ITC must be claimed within the stipulated timeframe (normally by 30th November following the end of the financial year), beyond which invoices can not be kept pending and will not be available for ITC.

Tracking blocked or Ineligible credits

Blocked or inelible Invoice may be tracked through Action Status tags.

1. Full Ineligible ITC – Categorized as “Rejected” ITC

If an entire invoice consists of blocked credit (ineligible ITC), set its action status to “Rejected”. These invoices are then tracked in a separate “Rejected ITC” section within the IMS – ITC Summary report.

These invoices are automatically excluded from the total ITC computation for GSTR-3B and are reflected in the “ITC Rejected” section of your GSTR-2B for reference.

Press Alt+W and add specific Remarks (e.g., “Blocked credit under Section 17(5)”) to these rejected invoices to maintain a clear audit trail for the reason credit was not claimed.

2. Partially Ineligible ITC – ITC Reduction Feature (New in Release 7.0)

For invoices that are only partially eligible for ITC, use the “Update Declared ITC Value“ option.

  • Manual Adjustment: Manually adjust the IGST, CGST, and SGST values directly on the invoice to reflect the eligible portion only.
  • Precise Tracking: The difference is captured as reduction. This ensures that the “Available ITC” in summary report shows only the credit legally allowed to claim, while the blocked portion is excluded from the final GSTR-3B figure.

3. Handling Ineligible ITC Bypassing IMS

Certain types of blocked credits do not appear in the IMS dashboard because they bypass it and flow directly into the “ITC Not Available” section of GSTR-2B (for example, credits ineligible due to Place of Supply (POS) rules or time limits).

Click F12 :Configure button to mark the entry as “ITC Ineligible”. This ensures that books match the ineligible sections of the portal’s GSTR-2B.

4. Summary View

The IMS – ITC Summary report serves as the central hub for tracking these separate categories. It provides a breakdown of:

  • Available ITC: Credits accepted or reduced for eligibility.
  • Pending ITC: Credits deferred for future action.
  • Rejected ITC: Blocked or incorrect credits declined to claim.

These features enables to move away from bulk reversals and maintain invoice-level accuracy for all blocked or ineligible credits.

Impact of non recomputation of  GSTR-2B after actions

If recomputation of GSTR-2B is not done, the latest actions (Accept, Reject, or Pending) will not be reflected in current tax return cycle.

  • Static Data in GSTR-2B: GSTR-2B is auto-generated on the 14th of each month. If actions are taken after this date, but recomputation is not triggered, the GSTR-2B remains static and continues to show the original data rather than filtered preferences.
  • Inaccurate ITC in GSTR-3B: Because the GSTR-2B is the basis for tax credit, the incorrect ITC values will flow into the “ITC Available” section of GSTR-3B. This may cause accidentally claim credit for rejected invoices, or miss out on accepted ones.
  • Filing Blocked: If any action (Accept/Reject/Pending) is taken after the GSTR-2B generated on the 14th, the portal will not allow GSTR-3B return filing until GSTR-2B recomputed.
  • Deemed Acceptance Risk: If no action is reflected due to non recomputation, correct and incorrect invoices alike may be treated as “Deemed Accepted” by the system, leading to wrongful ITC claims, causing legal disputes, interest and penalties.

Fixing the recomputation mistake

After uploading the actions to the portal, ay Exchange menu, click Recompute GSTR-2B option. This triggers the portal to update your ITC values based on your latest IMS actions, ensuring your GSTR-3B

IMS Management – Critical Questions & Answers

1. Problem: Accidentally an Invoice is rejected and GSTR-3B filed. How to fix this?

Solution: Once GSTR-3B is filed, the action on that invoice is frozen and locked. The status can not be changed. To rectify this, request the supplier to re-upload the invoice either as a fresh entry or with a minor amendment in their subsequent GSTR-1 filing. The modified Invoice will then reappear in IMS dashboard for fresh action, allowing to accept it and claim the ITC in the new tax period.

2. Problem: A supplier uploaded an invoice on April 10th, but buyer won’t receive the goods until May. How do the buyer avoid claiming ITC prematurely?

Solution: Buyer should mark this invoice as “Pending”in the IMS. This actionexcludes the invoice from buyer’s current month’s GSTR-2B and GSTR-3B, carrying it forward to the next month’s cycle. Buyer can set a specific Effective Date for a future period to ensure the buyer’s books stay synchronised with your actual receipt of goods without needing to revise earlier returns.

3. Problem: An amended invoice (B2BA) is only partially eligible for ITC. How to record it  accurately?

Solution: Through “Update Declared ITC Value” feature, instead of accepting the full value, manually adjust the IGST, CGST, or SGST amounts to reflect only the eligible credit. Preferably add a Remark (e.g., “Partial eligibility under Rule 37A”) for future reference.

4. Problem: Why Reverse Charge Mechanism (RCM) invoices are not seen in the IMS dashboard?

Solution: In Tally Prime 7, RCM invoices are currently excluded from the IMS framework. They do not require recipient action (Accept/Reject) on the portal and instead flow directly into GSTR-2B. These should be managed, reconciled, and RCM liabilities report using internal books of accounts and standard GSTR-2B report, rather than the IMS dashboard.

5. Problem: Buyer’s book data shows an invoice value of ₹70,000, but the portal shows ₹50,000 due to a supplier error. What is the solution ?

Solution: Buyer should ‘Reject’the invoice in IMS, or mark it as ‘Pending’, seeking clarification from the supplier. Buyer should not amend their books to match the erroneous portal entry. Once the supplier amends the invoice in their GSTR-1, the updated version will reflect in buyer’s IMS. Buyer would reset the status through a fresh “Accept” action.

6. Problem: Buyer missed the Action on several correct invoices before the 14th of the month. Will the Buyer lose the ITC?

Solution: Any invoice with “No Action” is automatically treated as ‘Accepted’ when GSTR-2B is generated. However, this is risky for incorrect invoices, as they will also be included in ITC computation unless these are actively reject or kept Pending.

7. Problem: Buyer updated several invoice status in TallyPrime after GSTR-2B was generated on the 14th. Why these are not reflected in GSTR-3B?

Solution: If action is taken after the 14th, but before filing GSTR-3B, click the “Recompute GSTR-2B” button. This triggers the portal to update ITC values based on latest IMS actions (Accepted/Rejected/Pending).

8. Problem: An invoice as “Mismatched” in Tally Prime because of a minor ₹1 rounding difference (or TCS inclusion). How toreconcile this?

Solution: Use the “Potential Matches” button in TallyPrime. It identifies invoices where major details like GSTIN and tax amounts match but minor fields differ. Then copy the document details from the portal into book entry to reconcile instantly. Enable F11 configuration “Mark reconciled as accepted in IMS” to automate this for all perfectly matched entries.

9. Problem: How to stay logged in longer avoiding repeated OTP

Solution: A single TallyPrime session remains valid for 6 hours. During this, data may be downloaded or uploaded without re-entering an OTP, provided the Company is not closed or TallyPrime is not shut down.