Input Service Distributors under GST
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The concept of Input Service Distributors or ISDs is present even in the current tax scenario. Under GST, an Input service distributor (ISD) can be the head office, registered office, branch office, or the regional office of an organization which receives the invoice for the purchase of input goods or services, or both, and distributes the available input tax credit from IGST, CGST, and SGST, for each recipient.
The conditions listed in the GST Law for the distribution of ITC by the ISD are:
1) ITC available for the month has to be distributed by the input service distributor (ISD) in the same month. Details are to be furnished by the ISD in the Form GSTR-6 on the basis of information available in the form GSTR-6A. Form GSTR 6 should contain the details of the tax invoices on which ITC has been received and is to be filed through the common portal either directly or from a Facilitation Centre, notified by the Board or Commissioner.
2) ITC on any goods or services or both used by the taxable person for the construction of immovable property (other than machinery or plant) on his own account including any goods or services or both used in the course or expansion of business has to be distributed separately for the ineligible ITC and eligible ITC.
*Cases of ineligible ITC are already mentioned above.
3) ITC available has to be distributed by the ISD among the major categories of IGST, CGST SGST, and UTGST
4) Input tax credit has to be distributed by the ISD in a proportionate ratio which is calculated in the below manner:
C – Input tax credit available for distribution.
C1 – Input tax credit available for distribution for recipient of ITC
T1 – Turnover of the recipient for whom ITC is calculated
T – Turnover of all the recipients summed up
C1 = C * T1/T
*5) In the event of the distribution of ITC to CGST and SGST, the following process has to be observed:
ITC available is to be distributed between CGST and SGST if the recipient of goods or service, or both, is located in the same state as the Input Service Distributor. For example, ABC Constructions is located in Punjab and the ISD is also in Punjab. ITC available to the ISD is INR 1,00,000. The ISD would need to divide the amount into CGST (INR 50,000) and SGST (INR 50,000).
*If the recipient is located in a state different than the ISD provider then the input tax credit available would need to be distributed as IGST. The amount distributed should be equal to the aggregate of ITC on CGST and SGST.
In the above example, if ABC Constructions was located outside Punjab than the ITC available would need to be distributed as IGST.
6) An ISD invoice or, as the case may be, an ISD credit note issued by an Input Service Distributor must contain the following details:
*name, address, and GSTIN of the Input Service Distributor
*a consecutive serial number containing alphabets or numerals or special characters hyphen or dash and slash symbolized as, “-”, “/”, respectively, and any combination thereof, unique for a financial year
*date of its issue
*name, address, and GSTIN of the recipient to whom the credit is distributed
*the amount of the credit distributed signature or digital signature of the ISD or his authorized representative
7) Any additional amount of input tax credit on account of issuance of a debit note to an Input Service Distributor The supplier shall be distributed in the manner and subject to the conditions specified in above 6 points and the calculation for the amount shall be done as per point 4 above. The input service distributor is responsible for filling the form GSTR-6. Any change in the amount of ITC by the ISD for any of the recipients and including the distribution of ITC to the wrong recipient has to be distributed in the month for which credit note was issued by the ISD
