09 Mar 2019Posted By: Mudit Handa


What is the concept of Input Service Distributor under GST

Goods & Services Tax is indeed a tax-friendly economic reform that is steadily leading the nation towards the path of excellence. The GST law includes various provisions for that are relevant to various types of merchants and traders having GST registration.

So far, the GST regime has sought to simplify the realm of indirect taxation. Various areas of the ordinary course of business have been properly covered and explained under the GST law. Hence, GST has enhanced the overall ease of doing business.

The GST Act has specific provisions regarding GST registration & GST return filing for different types of business activities. One such important aspect covered under the GST law is Input Service Distributor.

 

#1. Who is an Input Service Distributor?

An Input Service Distributor or ISD generally refers to an office of a supplier of goods or services that accepts the tax invoices for the receipt of input services. The ISD then issues a prescribed document for distribution of the CGST, SGST or UTGST & IGST input credits.

  • If an organisation has various branches across different states in India, then the head office will play the role of an ISD, who will distribute the input credits to his suppliers of taxable goods/services located in different states.
  • In this case, the suppliers of taxable goods/services will be having the same PAN as that of the ISD.

 

#2. How is the concept of ISD covered under GST?

Basically, the concept of ISD is as old as the service tax regime. It has been carried over to the GST regime.

  • These days it is commonly seen that mostly the corporate office procures various goods & services from its units located in different states in India. Such inputs are gathered by all the units of an organization.
  • Now, in such case, the purchase order is raised by the head office, while the suppliers issue GST invoice in the name of the head office.
  • Here, the head office itself can’t utilize the GST Input Credit on such services. This is because the Head office itself is not providing any output supply.
  • Hence, he will now act as the Input Service Distributor or ISD and will distribute the respective Input Credits pertaining to all its suppliers having separate GST registration in different states.
  • The concept of ISD has been governed u/s 20 of the CGST Act 2017.

 

#3. How can this be understood?

This can be practically understood by the help of a case study.

  • A is a CA firm, whose branch offices are located in different states say, UP, MP and Goa.
  • The branches of A provide services of chartered accountant such as statutory audit, RoC filing, Company formation etc. to their clients.
  • Now, since all the different units are having separate GSTINs, A can’t avail the input credit as it has not supplied any services to the clients.
  • Hence, A will have to distribute IGST, CGST and SGST input tax credit to the branches in different locations.

 

#4. What are the rules regarding GST return filing for ISD?

An ISD is required to take GST registration as an Input Service Distributor. They are required to fulfil a separate GST return filing procedure in FORM GSTR-6. This return has to be filed till 13th of every month.

 

If you need any guidance on GST registration or GST return filing procedure, please feel free to contact our business advisor at 8881-069-069.

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