If you search online whether Credit Notes can be marked as "Pending" in the GST Invoice Management System (IMS), nearly every accounting article, YouTube tutorial, and tax portal guide published before late 2025 gives the exact same categorical answer: "No. Credit notes cannot be kept pending under any circumstances. You must either Accept or Reject them."
That information is dangerously outdated. If your finance team still operates on the original October 2024 launch rules, you are either rejecting valid supplier credits or forcing premature ITC reversals on disputed bills.
Following intense representation from industry bodies, the GST Network released GSTN Advisory No. 624 (effective from October 2025). This regulatory update overhauled how the Invoice Management System handles credit notes, downward amendments, and vendor disputes.
This 2026 guide explains the updated rules in plain English: how the pending window functions, how credit notes impact your GSTR-2B ITC reduction, how to avoid double-reversals, and how to manage disputed supplier credit notes.
The Old Rule vs The 2026 Reality
When GSTN rolled out IMS in October 2024, it barred buyers from putting credit notes on hold. The government's logic was straightforward: a supplier issues a credit note to reduce their tax liability. If a buyer could leave that credit note "Pending" indefinitely, the government would face a revenue shortfall: the supplier's tax liability drops, but the buyer's ITC remains unreduced.
Consequently, buyers had only two choices:
- Accept: ITC is reduced immediately in GSTR-2B and GSTR-3B Table 4(B)(2).
- Reject: The credit note is voided for the recipient, restoring the supplier's tax liability in their next GSTR-3B.
This binary choice caused havoc in commercial disputes. If a supplier issued an incorrect or contested credit note (for example, demanding rate difference deductions not agreed upon), the buyer could not verify it with warehousing before the 20th. Rejecting it caused vendor hostility; accepting it forced an unjustified cash loss.
To understand the baseline mechanics of how invoices flow through the portal, review our primer on IMS pending invoices fundamentals.
GSTN Advisory No. 624: The Pending Window for Credit Notes
Effective October 2025, GSTN introduced a pragmatic middle ground for specific downward adjustments, including original credit notes and downward invoice amendments:
Key Provisions of Advisory No. 624
- Temporary Hold: Recipients can now mark an original Credit Note as Pending for a specified period.
- No Impact While Pending: While marked Pending, the credit note does NOT reduce ITC in the current period's GSTR-2B.
- Deemed Acceptance on Expiry: If no subsequent action (Accept or Reject) is taken before the specified time period expires, the record automatically flips to Deemed Accepted.
- Declaration of ITC Availed: When accepting a credit note, taxpayers can declare whether the original ITC was previously claimed, eliminating forced double reversals.
A Practical Example: Handling a Disputed ₹1,80,000 Credit Note
To see how Advisory No. 624 protects working capital, consider a consumer goods distributor in Bengaluru receiving shipments from an FMCG manufacturer:
- Date: 8th September 2026
- Transaction: Vendor uploads a Credit Note for ₹10,00,000 taxable value + ₹1,80,000 GST (18%) citing "damaged stock returned".
- The Dispute: The distributor's warehouse confirmed that only ₹2,00,000 worth of stock was damaged. The remaining ₹8,00,000 was accepted into active inventory. The credit note is inflated by ₹1,44,000 in tax.
Under the Old System (Pre-October 2025):
The distributor could not mark the credit note Pending. If they accepted it, ₹1,80,000 would be deducted from their eligible ITC in September's GSTR-2B. Their cash payment for September's GSTR-3B would spike by ₹1,80,000. If they rejected it, the vendor would face an automatic tax liability restoration, stalling further supplies.
Under the Current 2026 Rules (Advisory No. 624):
- September Action: On September 15th, the distributor logs into IMS and selects "Pending" for the credit note.
- September 2B Impact: Because the credit note is Pending, it is excluded from September's GSTR-2B. The distributor's September ITC is not reduced, preserving ₹1,80,000 in working capital.
- Resolution Period (15th Sept to 10th Oct): The distributor and vendor reconcile warehouse delivery receipts. The vendor agrees to cancel the incorrect credit note and issue an amended credit note for the correct ₹36,000 tax.
- October Action: Once the vendor amends the record in October's GSTR-1, the distributor logs into IMS, rejects the original inflated record, and accepts the corrected credit note.
By using the pending window, the distributor avoided an unnecessary ₹1,80,000 cash drain without alienating a critical manufacturing partner.
How IMS Actions on Credit Notes Flow into GSTR-2B & GSTR-3B
The table below summarizes the exact tax implications of each action available in IMS for credit notes under Advisory No. 624:
| Action in IMS | Flow to GSTR-2B? | Impact on GSTR-3B Table 4(B)(2) | Working Capital Impact |
|---|---|---|---|
| Accepted | Yes | Reduces ITC (Mandatory Reversal) | Immediate cash outflow; credit reduced for current month. |
| Pending (Within Specified Period) | NO | Zero Reduction | Preserved; gives time to resolve discrepancies. |
| Rejected | NO | Zero Reduction | ITC preserved; supplier tax liability restored. |
| No Action (Expiry) | Yes (Deemed) | Reduces ITC automatically | Treated as Accepted once the specified time period lapses. |
The Double-Reversal Trap: Declaring ITC Status
One of the biggest compliance headaches resolved by Advisory No. 624 is the double-reversal problem. Frequently, a supplier issues a credit note against an invoice that the recipient never claimed in the first place (for example, an invoice that sat unavailed or was previously reversed under Rule 37).
Under the enhanced IMS interface, when you accept a credit note, the portal prompts you with a checkbox:
“Whether ITC has been availed against the corresponding original invoice? [Yes / No]”
If you select "No", the portal registers the supplier's tax adjustment without reducing your Table 4(A) ITC in GSTR-3B, ensuring you are not penalized for credit you never took.
Why You Must Separate Credit Notes During Reconciliation
Standard reconciliation utilities often lump invoices and credit notes together into a single net total. This is a dangerous mistake under the IMS regime. Invoices represent eligible additions to Table 4(A)(5), whereas credit notes represent mandatory reversals in Table 4(B)(2).
You should separate credit notes from your invoice reconciliation using our browser-based matching engine. The matcher isolates credit notes (CDNR) into an independent reconciliation tab, allowing your finance team to review debit/credit balances separately and match them against pending purchase returns before taking action on the GST portal.
Operational Checklist for Managing IMS Credit Notes
- Audit CDNR on the 14th: Download GSTR-2B and filter all supplier credit notes. Match each against internal debit notes and return vouchers.
- Flag Disputed Notes Immediately: If a vendor issued an unauthorized credit note, mark it as Pending in IMS before the 20th. Do not leave it un-actioned.
- Track the Expiry Clock: A pending credit note will be disabled after a specified period. Ensure your procurement department contacts the vendor promptly to issue an amendment or cancellation.
- Verify Table 4(B)(2) Before Filing: Ensure the net reduction in your GSTR-3B exactly matches the sum of Accepted credit notes in IMS.
Conclusion
Credit notes can now be kept pending in IMS, but only until the expiry of the specified time period established by Advisory No. 624. Treat this window not as an indefinite holding bin, but as a high-priority resolution buffer. By managing credit notes actively in IMS, you avoid erroneous reversals, protect supplier goodwill, and keep your cash flow firmly under control.
Related guides
- IMS pending invoices: why invoices get stuck in IMS Pending and what it costs
- IMS accept, reject or pending: the decision tree and its ITC impact
- supplier not filed GSTR-1: recovering blocked ITC and following up