ISD (Input Service Distributor)


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In this article we discuss about the concept of Input Service Distributor (ISD).

ISD means:-

  • An office of the supplier of the services or goods or both which receives the tax invoices towards receipt of input services and
  • Issues a prescribed documents for the purpose of distributing the credit of CGST/SGST/UTGST/ IGST.
  • ISD can be either Branch or Head office.
  • ISD PAN shall be same as all other branches or HO but may have different GST number.
  • A company may different offices like marketing division etc. then may apply for separate ISD. So, a company can have multiple ISD.
  • ISD cannot distribute the input tax credit on (a) input and capital goods and (b) to outsourced manufactures or service providers.

Point to be noted in ISD Concept:-

  • Registration:– Input Service Distributor (ISD) has to compulsorily register as “ISD” apart from its registration as a normal taxpayer under the Act. Irrespective of the turnover.  The threshold limit of registration is not applicable to ISD.
  • Invoicing:– To distribute the amount of tax credit then an ISD is required to issue an ISD invoice.
  • Due date filling of GST Returns:- An ISD is required to file return in the Form GSTR-6 and the due date of filling of return is 13th of succeeding month.
  • Distribution of ITC:- Amount of the credit distributed shall not exceed the amount of credit available for distribution as at the end of a relevant month.
  • The recipient of the tax credit can view the tax credit so distributed by ISD in GSTR-2A  that is auto-populated and in turn, can claim the same by filing GSTR-2.
  • Annual Return:- An Input Service Distributor (ISD) is not required to file annual return.
  • Reverse Charge ITC:- Credit of tax paid under reverse charge cannot be distributed.

Manner of Distribution:-

  1. If service is used by only one of the recipient then ISD can distribute tax credit to that one recipient only.
  2. If service is used by more than one recipient then ISD can distribute tax credit to that more than one recipient on pro-rata basis of their turnover which are operational during the year.
  3. If service is used by all the recipient then ISD can distribute tax credit to that all the recipient on pro-rata basis of their turnover which are operational during the year.
  4. Amount of the credit distributed shall not exceed the amount of credit available for distribution.
  5. The excess/wrongly distributed credit can be recovered from the recipients of credit along with interest (section 73 or 74).
  6. Input credit of IGST can be distributed as IGST/CGST.
  7. Input credit of CGST can be distributed as CGST in case of ISD and recipient in one state.
  8. Input credit of CGST can be distributed as IGST in case of ISD and recipient in different state.
  9. Input credit of SGST can be distributed as SGST in case of ISD and recipient in one state.
  10. Input credit of SGST can be distributed as IGST in case of ISD and recipient in different state.

Summary

Services used by Distributed to Basis
One recipient One recipient   —
More than one recipient more than one recipient on pro-rata basis Turnover which are operational during the year
All the recipient All the recipient on pro-rata basis Turnover which are operational during the year

Diagrammatically distribution of ITC can be summaries as follows:-

Credit of Input Services

 

Credit of IGST ———- IGST/CGST/SGST

 

Credit of CGST ———- CGST/IGST

 

Credit of SGST ———- SGST/IGST

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