ISD or an Input Service Distributor is a type of taxpayer under GST who needs to distribute the GST input tax credits that pertain to its GSTIN to its units or branches having different GSTIN but registered under the same PAN.
Input service distributor (ISD) ” means an office of the supplier of goods and/or services, which receives tax invoices issued towards receipt of input services or such other document as prescribed for the purposes of distributing the credit of CGST, SGST.
An Input Service Distributor (ISD) is a taxpayer that receives invoices for services used by its branches. It distributes the tax paid known as the Input Tax Credit (ITC), to such branches on a proportional basis by issuing ISD invoices. The branches can have different GSTINs but must have the same PAN as that of ISD.
Situations where ISD is not applicable
ISD cannot distribute the input tax credit in the following cases:
- Where ITC is paid on inputs and capital goods. For instance, raw materials and machinery purchased.
- ITC cannot be distributed to outsourced manufacturers or service providers.
Purpose of registering as ISD
The concept of ISD is a facility made available to business having a large share of common expenditure and billing or payment is done from a centralized location. The mechanism is meant to simplify the credit taking process for entities and the facility will strengthen the seamless flow of credit under GST.
Conditions to be fulfilled by ISD
- Registration: Input Service Distributor has to compulsorily register as “ISD” apart from its registration under GST as a normal taxpayer. Such taxpayer has to specify under serial number 14 of the REG-01 form as an ISD. They shall be able to distribute the credit to the recipients only after this declaration.
- Invoicing: ISD can distribute the amount of tax credit to recipients as earlier stated by issuing an ISD invoice.
- Returns: Amount of tax credit distributed should not exceed the amount of tax credit available with the ISD as at the end of a relevant month to be filed in GSTR-6 by the 13th* of succeeding month by ISD. The ISD can get the information of the ITC from the GSTR-2B return.
Conditions for distribution of credit by Input Service Distributor: As per Sec. 20(2) of the CGST Act,2017 specifies condition subject to which credit can be distributed by Input Service Distributor. These are:
(1) The credit can be distributed to the recipients of credit against a document containing such details as may be prescribed.
(2) The amount of the credit distributed shall not exceed the amount of credit available for
(3) The credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient.