In this post, We will go over the role of an Input Service Distributor (ISD) under GST, its importance, the registration process, and how input tax credit is allocated. We will also discuss scenarios in which ISD is not applicable, qualifying requirements, and significant distinctions between ISD and regular taxpayers.
Let’s look at each section in detail:
An input service distributor (ISD) is a taxpayer who collects invoices for services utilized by its branches and distributes the Input Tax Credit (ITC) to them. ISD invoices are used to accomplish this proportionally. While the branches may have different GSTINs, they must all have the same PAN as the ISD.
The ISD mechanism is necessary because:
To register as an Input Service Distributor (ISD) for GST, do these steps:
The Input Service Distributor (ISD) cannot deliver the input tax credit (ITC) under the following cases:
To qualify as an Input Service Distributor (ISD) under GST, you must meet the following criteria:
The distribution of Input Tax Credit (ITC) under GST follows the following rules:
Aspect | Regular taxpayers | Input service distributor |
ITC claiming | Claims ITC directly related to purchases | Distributes ITC for services incurred centrally |
Compliance requirements | Standard GST compliance | Specific components for ISD, including GSTR-6 |
Outward supplies | Engages in outward supplies | No outward supplies; only distributors ITC |
This brings an end to this post. If you have any questions or comments, please use the space below, and we will be pleased to answer them.
Ans: Yes. Different taxpayer offices may apply for ISD registration.
Ans: Different offices, like the marketing and security divisions, may apply for separate ISD.
Ans: Credit distributed in violation of the Act’s restrictions may be recovered from the recipient, along with any relevant interest.
Ans: Revenue-generating units have a GST liability, hence the ITC for services used should be allocated. This allows them to use the tax credit to properly offset their GST liability.