The concept of ISD

• A company may have head office at one place and units at other places which may register separately under GST
• The Head Office would be procuring certain services which would be for common utilisation of all units across the country
• The bills for such expenses would be raised on the Head Office
• But the Head Office itself would not be providing any output supply so as to utilise the credit which gets accumulated on account of such input services
• Since the common expenditure is meant for the business of all units, it is but natural that the credit of input services in respect of such common invoices should be apportioned between all the consuming units
• ISD mechanism enables such proportionate distribution of credit of input services amongst all the consuming units

Who is an Input Service Distributor (ISD)?

ISD means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office.

Mechanism 

1. ISD office receives Tax Invoices of Common Input Services (not goods)

2. Multiple offices separately registered under GST for supply of Goods or Services or Both

3. All such places/ offices including ISD have a common PAN Number

4. ISD distributes the ITC on Common Services between its various offices using prescribed document

Registration of ISD

• An ISD will have to compulsorily take a separate registration as such Input Service Distributor (ISD)
• There is no threshold limit for registration for an ISD
• All other offices/ locations, to whom ITC is distribute are separately registered as Tax Payers under GST

Procedure for Distribution of ITC by ISD

1. Input Tax Credit available during a month shall be distributed in the same month and details of the same are furnished in GSTR – 6

2. The ISD will issue an ISD Invoice, as prescribed under Rule 54(1) of the CGST Rules with clear indication that it is only issued for distribution of ITC

3. An ISD shall separately distribute both the amount of ineligible and eligible Input Tax Credit

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