CONCEPT OF INPUT SERVICE DISTRIBUTOR IN GST
By: – Anuj Bansal
Goods and Services Tax – GST
Dated:- 12-3-2018
An Input service distributor (ISD) is an office of supplier of goods or services which receives tax invoices for services and distributes the credit in such invoices to its branches having the same PAN in the manner prescribed under the law. However, in order to distribute credit, following conditions are required to be followed:
* The credit can be distributed to the recipients of credit against a document containing the details as may be prescribed.
* The amount of credit distributed shall not exceed the amount of credit available for distribution.
* The input tax credit available for distribution in a month shall be distributed in the same month. E.G. Input Tax Credit for the month of July shall be distributed in the same month i.e. in the month of July only.
Procedure for distribution of credit:
The procedure for distribution of credit is given in Sec
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egistered engaged in the taxable as well as exempted supply, reduced by the amount of any duty or tax levied.
* relevant period – means –
* If the recipients of credit have turnover in their states during the FY preceding to the current FY, the Preceding FY; or
* If some or all recipients do not have any turnover in their States in the FY preceding the year during which the credit is to be distributed, relevant period will be the last quarter for which details of such turnover of all the recipients are available, previous to the month during which credit is to be distributed.
Therefore, if all the recipients have turnover in the previous year, then turnover for the previous year shall be considered for purpose of calculating the ratio.
However, in a situation, if all the recipient were not having turnover in the previous year, then turnover of the last quarter (in which all recipients having turnover) preceding the month of return shall be considered for computing the ratio E.g
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ients to whom the input service is attributable.
Credit shall be distributed in the following manner:
Location of Branch (recipient of ITC)
Manner of Distribution of Credit
Same state as that of ISD
The credit of IGST, CGST, SGST or UTGST shall be distributed as IGST, CGST, SGST or UTGST respectively.
Different state as that of ISD
The credit of IGST, CGST, SGST or UTGST shall be distributed as IGST.
Input Service Distributor Invoice / Credit Note for the distribution of credit:
The document prescribed for distribution of credit is “Input Service Distributor Invoice”. Moreover, the details required in the invoice are also prescribed in the same Rule. An “Input Service Distributor Invoice / Credit Note” shall be issued to the recipient for distributing the credit and same shall be reported in the ISD Return. Following are the details required to be mentioned on the invoice:
* Name, Address and GSTIN of the ISD.
* Consecutive serial number not exceeding sixteen characters,
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contained in the original invoice was distributed. However, in case where due to reduction in credit, credit with the recipient becomes negative, the amount shall be added to the output liability of recipient.
Services taken under RCM
The ISD is not permitted to make payment of tax under RCM. Therefore, in a situation where the ISD is taking services which are taxable under RCM, it is suggested that either take a normal registration and take services in such registration and pass on the credit to ISD by raising an invoice on ISD. The other option is that the company can take such services in other existing normal registration and pass it on to ISD. Thereafter, the ISD can distribute the credits to the concerned units.
GST Retuns:
* An ISD is required to file monthly return in GSTR-6 within 13 days after the end of the month and will have to furnish information of all ISD invoices issued. The monthly return can be prepared after adding, correcting or deleting the details on the bas
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ed only for Delhi Unit: ₹ 5,00,000/-
(ii) IGST, CGST & SGST paid on services used for all units: ₹ 20,00,000/-
Total Turnover of the units for the preceding Financial Year 2016-17 are as follows: –
Unit Turnover (Rs.)
Total Turnover of three units = ₹ 10,00,00,000
Turnover of Delhi unit = ₹ 5,00,00,000 (50%)
Turnover of Gurgaon unit = ₹ 3,00,00,000 (30%)
Turnover of Mumbai unit = ₹ 2,00,00,000 (20%)
Now credit shall be distributed as follows:
(Figures in Rs.)
Particulars
Total
Delhi
Gurgaon
Mumbai
Turnover of units in PY 2016-17
10,00,00,000
5,00,00,000
3,00,00,000
2,00,00,000
GST paid on services used only for Delhi Unit.
5,00,000
5,00,000
–
–
IGST, CGST & SGST paid on services used in all units: Distribution on pro rata basis to all the units which are operational in the current year
20,00,000
10,00,000
6,00,000
4,00,000
Note: Credit distributed on pro rata basis on the basis of the turnover of all the un
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tributed. So the information of the quarter July 2017 to September 2017 shall be used:
(Figures in Rs.)
Particulars
Total
Delhi
Gurgaon
Mumbai
Turnover of units during quarter July 2017 to September 2017
5,00,00,000
2,00,00,000
1,25,00,000
1,75,00,000
GST paid on services used only for Delhi Unit.
5,00,000
5,00,000
–
–
IGST, CGST & SGST paid on services used in all units: Distribution on pro rata basis to all the units which are operational in the current year
20,00,000
8,00,000
5,00,000
7,00,000
On the basis of above, it would have been observed that compliances under ISD requires great efforts like maintaining credits, mismatching of credits, distributing credit, issuing Input Services Distributor Invoices, etc. Moreover, the determination of ratios for distribution is also a cumbersome process. Though it's a legacy brought forward from erstwhile law but no attempt has been made to simplify the process. Even after going through the provisions, the f
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or determining the ratio for distribution. Now, there was no Quarter in common when all the units were operational, then on what basis the ratio to be determined?
Reply By MAHESH MAIYA as =
Dear Sir,
We are GST registered Pvt Ltd co in Karnataka, have marketing offices in Chennai, Mumbai, Kolkata, Pune & Delhi. The rent is being paid by the company to un-registered landlords. Should we discharge RCM for such rent paid by the company ? if so, whether the GST paid under RCM can be taken credit in Karnataka ?
Mahesh. M
Dated: 13-3-2018
Reply By Ganeshan Kalyani as =
presently there is no tax under reverse charge on inward supply of goods or services from an unregistered dealer. hence you are not liable to pay gst as a recipient accordingly no question of distribution of tax paid.
Dated: 19-3-2018
Reply By RAVINDER GAMBHIR as =
Dear Sir,
Is it mandatory to take ISD registration. To be specific
-a pvt ltd company is having Regd/Head office in Delhi,registered in GST, and having
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