GST IMS Updates on ITC and Credit Notes

India’s GST regime continues to reform in order to simplify compliance, more transparency, and simplified filing of returns. Starting October 2025, there will be certain New changes in GST added under the Invoice Management System (IMS). The receivers as well as the senders shall both gain from the new changes that will reduce disputes, eliminate unnecessary reversal of Input Tax Credit (ITC), and improve GST return filing more accurately overall.

In this article, we will explore the new provisions in detail, become familiar with their implications in actual practice, and see how they will impact the filing and reconciliation of GST returns.

Main Highlights of the New Amendments in GST

The October 2025 amendments have their concentration on three main areas:

• Pending Action for Specified Records
• Reversal of ITC Only on Availment
• Option to Save Remarks While Rejecting or Keeping a Record Pending

These requirements bring in flexibility for taxpayers and filing of GST returns more in line with real business transactions.

• Action to be taken for Specified Records

Another extremely important new change in GST is the flexibility to file some records pending instead of accepting or rejecting them in totality.

• Allowed Records to be Filed as Pending

The following type of documents can be filed pending:

• Credit Notes and their upward revisions
• Reversal downwards of Credit Notes when the initial credit note is already accepted
• Reversal downwards of invoices or debit notes when the initial invoice is already accepted and GSTR-3B is filed
• Reversal downwards released by e-commerce operators when the initial entry is already accepted and GSTR-3B is filed

Time Limit for Pending Status

• Monthly return filers: Books can be kept pending for one month.
• Quarterly return filers: There can be a quarter’s wait time left on the records.

For instance, if there is a credit note received from a supplier in October 2025 but the recipient wants to give themselves an extra time period to confirm, they can put the record in “Pending” and resolve it next month (in case of monthly filers) or next quarter (in case of quarterly filers).

This amendment prevents early rejection or acceptance of the entries and gives a time lag to taxpayers so that they can cross-match their books, reconciling while filing GST returns more accurately.

• Reversal of ITC Only on Actual Availment

Taxpayers previously were reversing entire Input Tax Credit whenever a credit note was raised, though they did not avail the entire ITC at the time of filing. This led to cost of compliance and reversals.

• From October 2025, ITC reversal will only be in the event that the credit was used.

Key Points:

• If no ITC was used, no reversal must be performed.
• If ITC was used partially, reversal only for that part.
• Taxpayers are allowed to report the actual ITC used amount and reference the same reversal amount.

Illustrative Example

Assuming an invoice of ₹1,00,000 + GST ₹18,000 is issued. The recipient in the first stage only takes ITC of ₹9,000. If later, a credit note reduces the tax amount, no reversing of the full ₹18,000 is necessary only ₹9,000.

If on that invoice no ITC was availed, no reversing anything at all, even if, say, some later time in the future a credit note is issued.

This makes GST return filing even more logical and less prone to errors. Taxpayers still have to, however, maintain availed ITC records appropriately for the purpose of compliance.

• Facility to Save Remarks

There is an added benefit in the facility to provide remarks on rejection or maintaining pending status of a record.

Advantages of Adding Notes

• The remarks will be reflected in the recipient’s GSTR-2B and in the supplier’s outward supplies dashboard.
• Suppliers would be made known of the precise cause of rejection or pending.
• It reduces disputes and follow-up communication among trading partners.
• For example, if a customer returns an invoice on the account of price mismatch, he can place a remark, “Price mismatch – waiting for revised invoice.” It gives an immediate reminder to the supplier, which helps in the correction process in advance prior to the GST return filing.

• Transitional Rules and Timelines

• The new provisions apply from the October 2025 tax period.
• Subsequent records made and communicated will be under the new provisions.
• The option to retain pending status will be calculated from the date of communication with the supplier.
• This presents taxpayers with clear timelines to deal with without a confusion with previous records filed under previous provisions.

• Impact on GST Return Filing

These revised GST reforms will directly affect business operations with regard to return filing and reconciliation.

• Simplified Reconciliation

Pending status allows enterprises to confirm entries before action, reducing mismatched bills at GSTR-2B reconciliation.

• Lighter Compliance Burden

ITC reversal on utilized amounts only simply indicates taxpayers cease reversing credits which they never even utilized in the first place, saving effort and reducing penalty risks.

• Clear Communication

Comments offer suppliers and recipients greater clarity so that they can clear mismatches before GST return filing due dates.

• System Updates Required

Companies should make sure their ERP or accounting software is updated to facilitate pending records processing, reversing partial ITC, and remark fields. Filing in such cases would become prone to errors without these updates.

Benefits of the New GST Amendments

The October 2025 implementations will yield some business and GST system benefits:

• Flexibility – Taxpayers are not compelled to take final action on reports until they are certain.
• Accuracy – Only the ITC used really needs to be reversed, totally with filer accuracy.
• Transparency – Comments avoid misinterpretation and speed correction.
• Enhanced Compliance – The IMS is simpler and more aligned with business reality.

Challenges Ahead

While such improvements are welcome, organizations may initially face some of the teething problems:

• Preparedness of the System: ERP and accounting modules must be updated.
• Training Requirements: The Employees must be trained so that we can handle pending actions, remark fields, and half ITC reversals.
• Problem of Transition: Organizations must distinguish the pre-October 2025 and post-October 2025 records carefully.
• Within Time Limit: Pending entries must be addressed within the authorized time (one month or one quarter).

Compliance Tips to Companies

For a smooth shift towards the new advancements of GST, companies must:

• Upgrade software systems well in advance of October 2025.
• Clear books on a regular basis so pending entries get cleared punctually.
• Maintain proper ITC accounts for reversals in a proper manner.
• Optimally utilize remarks to communicate issues effectively to suppliers or buyers.
• Send training to accounting employees to achieve the new process of GST return filing.

Conclusion

The new GST updates of October 2025 are a move to simplify transactions, make them easier, and more accurate within the GST system. By retaining pending status records, reversal of only available ITC, and the addition of remarks, businesses have enhanced freedom and transparency in transactions.

Though system updates and training will be required to make the change happen, they will finally make it easier for GST returns to be filed and closer to real business processes. Pre-filing and best practices with forward planning will make taxpayers transition smooth and complete utilization of these changes.

FAQs

1. What are the key new changes in GST from October 2025

The revised GST changes from October 2025 aim to boost compliance and eliminate unnecessary complexity while filing returns. Taxpayers are now allowed to voluntarily retain certain documents, including credit notes and invoice changes, in a pending condition instead of accepting or rejecting them online. Another notable change is that reversal of Input Tax Credit (ITC) will be done only on the quantum consumed and not the total credit available in a transaction. In addition, taxpayers are now able to input comments while rejecting or pending a record, in order to facilitate improved communication with the recipient and supplier.

2. How will pending status affect GST return filing?

Concept of pending status is such a relief for businesses while filing GST returns. Instead of being forced to act on a document in haste, taxpayers can keep it pending and look at it later in the following month or quarter, as per their filing schedule. This avoids businesses from making errors since they work in haste to accept or decline entries. By giving room for confirmation, pending status ensures only rightful and matched records roll over to GST returns, keeping disputes and discrepancies at a low.

3. What is ITC reversal only on availment?

Previously, the taxpayers had to reverse the entire value of ITC with every credit note raised, even if they did not avail the entire credit previously. Only the amount actually used by the taxpayer will be reversed under the new provision in the event of reversal of ITC. For instance, if a company has availed only a part of the eligible ITC, only that part must be reversed, and if no ITC is availed, no reversal at all is required. This shift aligns ITC reversals with usage, and hence, GST return filing makes more sense and is less cumbersome.

4. Why is commenting useful in the new system? 

Comments are a useful new addition because they make GST transactions transparent and comprehensible.

Where a taxpayer accepts or retains pending, one can now leave a reason comment, say, “Incorrect value” or “Waiting for revised invoice.” These comments will also be visible to the recipient in the GSTR-2B and also on the suppliers’ outward supplies dashboard. This prevents wasteful back-and-forth communication, assists in early realization of the problem by the suppliers, and allows quicker correction, making GST return filing easier to both parties in the long run.

5. What are the steps to be followed by businesses in preparation for the future GST reforms?

The steps need to be initiated by the companies much in advance of October 2025 so that implementation is properly done. The first step is to redesign ERP or accounting software in such a manner that it would be able to handle new features like pending records, ICT partial reversal, and remark facilities. Staff training is also necessary so that the finance department is aware how to use the new system effectively in order to file GST returns. Proper records of ITC should also be maintained by the companies and reconcile regularly so that the outstanding entries get cleared within the time limits as prescribed. If these steps are taken, then the companies can avoid the issue of compliance and can benefit from the upcoming reforms.

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