Who is Input Service Distributor (ISD) under GST?

  1. Input Service Distributor is an office of a business which receives tax invoices for input services and distributes available Input Tax Credit (ITC) to other branch offices of the same business. ISD and the branches may have different GSTIN’s, but they must have same PAN.
  2. ISD Mechanism is meant only for distributing the credit on common invoices pertaining to INPUT SERVICES and not on goods (Input Goods or Capital Goods).

For Example, the head office of XYZ Pvt Ltd is located in Hyderabad. XYZ Pvt Ltd has its branches in Mumbai, Bangalore and Chennai. The head office has received the professional services on behalf of all its branches and received the tax invoice for the same. As the professional services are used by all the branches, the head office at Hyderabad cannot claim the entire input tax credit. The Input Tax Credit should be distributed to the branches located in Mumbai, Bangalore and Chennai.

Registration of ISD under GST

  • An Input Service Distributor should compulsorily register under GST as an ISD even though it may be separately registered under GST.
  • There is no Threshold limit for ISD registration under GST.

Purpose of registering as ISD

The concept of ISD is a facility made available to business having a large share of common expenditure and where billing/payment is done from a centralized location. The mechanism is meant to simplify the input tax credit taking process for the entities and the facility is meant to strengthen the seamless flow of credit under GST

Manner of Distribution of credit under GST

The ISD should maintain arithmetical accuracy and ensure that the credit distributed does not exceed the credit available with it for distribution.

  • The credit regarding Input Service should be distributed only to the particular recipient to whom that input service is attributable.
  • If the input service is attributable to more than 1 recipient, the relevant ITC should be distributed to such recipients in the ratio of turnover of the recipient in a state/territory.
  • ITC relating to input services which are common for all branches should be distributed to all the recipients in the ratio of turnover as described in (b) above.
  • Both ineligible and eligible ITC should be distributed separately.
  • ITC of CGST, SGST/UTGST and IGST should be distributed separately.

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