Input Service Distributor (ISD) under GST

Input Service Distributor (ISD) is a concept that has been introduced under the Goods and Services Tax (GST) regime in India. An Input Service Distributor is essentially an office of the supplier of goods or services, which receives invoices for the input services supplied to the supplier's various branches or offices. The ISD then distributes the input tax credit (ITC) on these invoices to the respective branches or offices of the supplier. This article answers some of the frequently asked questions about the Input Service Distributor under GST.

Who can be an Input Service Distributor under GST?

An Input Service Distributor can be any office of a supplier of goods or services that receives invoices for the input services supplied to the supplier's various branches or offices. The office of the ISD must be registered under GST, and it must have a valid GSTIN (Goods and Services Tax Identification Number).

What is the role of an Input Service Distributor under GST?

The role of an Input Service Distributor under GST is to distribute the input tax credit (ITC) on invoices for input services received by the supplier's various branches or offices. The ISD must distribute the ITC in proportion to the turnover of each branch or office, based on the formula prescribed under the GST law.

What is the formula for distribution of ITC by an Input Service Distributor under GST?

The formula for distribution of ITC by an Input Service Distributor under GST is as follows:

ITC attributable to a recipient unit (R) = (ITC on common input services) x (Adjusted Total Turnover of R) / (Adjusted Total Turnover of all recipient units)

Here, "ITC on common input services" refers to the total amount of input tax credit available on invoices for the input services received by the ISD. "Adjusted Total Turnover of R" refers to the turnover of the recipient unit for which the ITC is being distributed, minus the turnover of any exempt supplies made by the recipient unit. "Adjusted Total Turnover of all recipient units" refers to the total turnover of all recipient units of the supplier, minus the turnover of any exempt supplies made by any of the recipient units.

What is the time period for distribution of ITC by an Input Service Distributor under GST?

An Input Service Distributor must distribute the ITC on invoices for input services received by the supplier's various branches or offices in the same month in which the invoice is received. The ISD must file a return in Form GSTR-6 by the 13th of the following month, containing details of the ITC distributed to each of the recipient units.

What are the conditions for availing ITC by a recipient unit from an Input Service Distributor under GST?

To avail of the ITC distributed by an Input Service Distributor under GST, the recipient unit must fulfill the following conditions:

The recipient unit must be a registered person under GST.
The recipient unit must be in the same state as the ISD or in a state for which the ISD has obtained a separate registration.
The recipient unit must have a valid GSTIN.
The recipient unit must have used the input services for the purposes of its business.

Can an Input Service Distributor claim ITC on invoices for input services received by it?

An Input Service Distributor cannot claim ITC on invoices for input services received by it. The ISD is only authorized to distribute the ITC to the respective recipient units, based on the formula prescribed under the GST law.

What are the consequences of non-compliance by an Input Service Distributor under GST?

If an Input Service Distributor fails to distribute the ITC on invoices for input services received by the supplier's various branches or offices, or if the ISD distributes the ITC in a manner that is not in accordance with the formula prescribed under the GST law, then the recipient units may not be able to avail of the ITC. The ISD may also be liable to pay interest and penalty under the GST law.

Conclusion

The Input Service Distributor is an important concept under the GST regime, as it enables the supplier of goods or services to distribute the input tax credit on invoices for input services received by its various branches or offices. The ISD must comply with the conditions and procedures prescribed under the GST law for distribution of ITC, failing which it may face consequences under the law.