According to Section 2(61) of the CGST Act of 2017, a “Input Service Distributor” is a location of the supplier of goods or services or both that accepts tax invoices issued under Section 31 for the receipt of input services and issues a prescribed document in order to distribute the credit of central tax, State tax, integrated tax, or Union territory tax paid on the aforementioned services to a supplier of taxable goods or services or both having the same Permanent Account Number.
As a result of the definition, an office of a firm that receives tax invoices for input services and distributes the applicable input tax credit to other branch offices of the business is known as an Input Service Distributor (ISD) under the GST.
Who is eligible for ISD credit?
Only a unit that is a supplier of goods or services and has the same Permanent Account Number as the Input Service Distributor is eligible to receive credit from an ISD.
Compulsory Registration: Section 24 of the CGST Act mandates that every ISD register for GST, whether or not it is separately registered under the law.
Under GST law, the registration process for both registered persons and input service distributors is the same.
Format for ISD Invoices Under GST:
1. An ISD invoice must be generated before ITC can be distributed.
If ITC has already been distributed, an ISD Credit Note must be issued to reduce the credit.
According to sub-rule (1) of rule 54, an ISD’s invoice or credit must include the information listed below:
1.The Input Service Distributor’s name, address, and GSTIN
2. A consecutive serial number (not to exceed 16 characters), Further
a. Date of its issue
b. Name, address, and GSTIN of the recipient to whom the credit is distributed.
c. Amount of the credit distributed.
d. Signature or digital signature of the ISD or his authorized representative.
e. It can be in one or more series; contain alphabets or numerals, or contain special characters
hyphen or dash and slash symbolized as “-” and “/,” respectively.
2. If ISD is a banking company office Exceptions apply to insurers, banks, financial institutions, and NBFCs. If the provider of the taxable service is an insurer, bank, or financial institution, including a non-banking financial company, then:
a. A tax invoice or any other document may be issued
b. It may be printed out or made available electronically
c. It may or may not be serially numbered
d. It may or may not contain the address of the recipient of the taxable service while also including the additional information required in rule 46.
The reason for registering as an ISD
ISD refers to a facility made available to businesses with a significant portion of shared expenses, with invoicing and payment handled from a single site. The service would improve the seamless flow of credit under GST and the approach is designed to make the credit-taking process for firms simpler.
Method of Credit Distribution under GST
The ISD must ensure that calculations are accurate and that the amount of credit issued does not exceed the amount of credit that is available for distribution.
Only the specific recipient to whom that input service is attributable should receive credit for it.
The appropriate ITC shall be dispersed to such recipients in proportion to their turnover within a state or territory if the input service is attributable to more than one receiver.
All beneficiaries should receive ITC in the ratio of turnover outlined in (b) above for input services that are similar to all branches.
ITC that is ineligible and that is eligible must be given out separately.
It is best to disburse ITC for CGST, SGST/UTGST, and IGST separately.
FAQ ‘ S
Q. What are the documents used by ISD to distribute credit?
The distribution of credit would take place through a document created specifically for this use, is the answer. The amount of input tax credit being distributed would be listed in the aforementioned document.
Q. How many suppliers can receive the input tax credit from an ISD?
No. Only those registered individuals who have used the input services in the course or advancement of their business are eligible to receive the input tax credit of input services.
Q. What is covered by the turnover used for ISD?
Ans. Any duty or tax imposed under entry 84 of List I and entries 51 and 54 of List II of the Seventh Schedule to the Constitution is excluded from the turnover for the purposes of ISD.
Q. ISD is required to file a return, right?
Ans. ISD must submit their monthly returns by the 13th of the next month, yes.
Q. Can a business have more than one ISD?
Ans. Yes, several offices, such as the security or marketing divisions, may apply for separate ISDs.
Q. What procedures are in place for ISD to retrieve credit that was given out in excess or incorrectly?
Ans. By taking legal action under section 73 or 74, the excess or improperly allocated credit may be recouped from the recipients together with interest.
Q. Can ISD distribute CGST and IGST credit to recipients in different States as IGST credit?
Ans. Yes, an ISD may distribute CGST credit as CGST and IGST credit as CGST to beneficiaries who are located in separate States.
Q. Can an ISD distribute SGST/UTGST credits as IGST credits to recipients who are located in different States?
Ans. Yes, an ISD is permitted to distribute SGST/UTGST credits as IGST to beneficiaries in various States.
Q. Does the ISD have the authority to disburse CGST and IGST credits as CGST credits?
Ans. Yes, an ISD may distribute CGST and IGST credit to recipients who are located in the same State as CGST credit.
Q. Is it possible to distribute the SGST/UTGST and IGST Credit as SGST/UTGST Credit?
Ans. For receivers residing in the same State, ISD may disburse SGST and IGST credit as SGST / UTGST credit.
Q. How should an ISD distribute common credit among all of its recipients?
Answer: ISD may distribute the shared credit used by all recipients on a pro rata basis, or according to the ratio of each recipient’s turnover to the total turnover of all the recipients to whom credit is distributed.