INPUT SERVICE TAX DISTRIBUTOR UNDER GST REGIME
By: – DR.MARIAPPAN GOVINDARAJAN
Goods and Services Tax – GST
Dated:- 1-4-2017
Input Service Distributor
The concept of Input Service Distributor ('ISD' for short) was introduced in CENVAT Rules, 2004. Rule 2(m) of CENVAT Credit Rules, 2004 defines the term 'input service distributor' as an office of the manufacturer or producer of final products or provider of output service, which receives invoices issued under rule 4A of the Service Tax Rules, 1994 towards purchases of input services and issues invoice, bill or, as the case may be, challan for the purposes of distributing the credit of service tax paid on the said services to such manufacturer or producer or provider or an outsourced manufacturing unit], as the case may be;
GST also retain the concept of ISD. Section 2(61) of the Central Goods and Services Tax Bill, 2017 ('Bill' for short) defines the term 'input service distributor' as an office of the supplier of good
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e required to be registered under this Act.
Tax invoice
Rule 4(2) of Service Tax Rules, 1994 provides for the issue of invoice by ISD. The said Rule provides that every input service distributor distributing credit of taxable services shall, in respect of credit distributed, issue an invoice, a bill or, as the case may be, a challan signed by such person or a person authorized by him, for each of the recipient of the credit distributed, and such invoice, bill or, as the case may be, challan shall be serially numbered and shall contain the following, namely:-
* the name, address and registration number of the person providing input services and the serial number and date of invoice, bill, or as the case may be, challan issued under sub-rule (1);
* the name and address of the said input service distributor;
* the name and address of the recipient of the credit distributed;
* the amount of the credit distributed.
in case the input service distributor is an office of a banking c
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Where the ISD is an office of a banking company or a financial institution including a non banking financial company, a tax invoice shall include any document in lieu thereof, by whatever name called, whether or not serially numbered but containing the information as prescribed above.
Manner of distribution of credit by ISD
Rule 7 of CENVAT Credit Rules, 2004 provides the manner of distribution of CENVAT credit as detailed below. The input service distributor shall distribute the CENVAT credit in respect of the service tax paid on the input service to its manufacturing units or unit providing output service or an outsourced manufacturing units, as defined in Explanation 4, subject to the following conditions, namely :-
* the credit distributed against a document referred to in rule 9 does not exceed the amount of service tax paid thereon;
* the credit of service tax attributable as input service to a particular unit shall be distributed only to that unit;
* the credit of serv
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concerned;
* credit of service tax paid on input services, available with the input service distributor, as on the 31st of March, 2016, shall not be transferred to any outsourced manufacturing unit and such credit shall be distributed amongst the units excluding the outsourced manufacturing units.
Section 20 of the bill deals with the manner of distribution of credit by ISD. Section 20(1) provides that the ISD shall distribute the credit of central tax as central tax or integrated tax as integrated tax, by way of issue of a document containing the amount of input tax credit being distributed in such manner as may be prescribed. In this regard rule is to be framed.
Conditions for input service distribution
Section 20(2) provides that the ISD may distribute the credit subject to the following conditions-
* the credit can be distributed to the recipients of credit against adocument containing such details;
* the amount of the credit distributed shall not exceed the amount of cr
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f all recipients and which are operational in the current year, during the relevant period.
Relevant period
The term 'relevant period' is defined in the explanation (a) to Section 20(2) that shall be-
* if the recipients of the credit have turnover in their States or Union territories in the financial year preceding the year during which credit is to be distributed, the said financial year; or
* if some or all recipients of the credit do not have any turnover in their States or Union territories in the financial year preceding the year during which the credit is to be distributed, 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.
Recipient of credit
The term 'recipient of credit' is defined in the Explanation (b) to Section 20(2) as the supplier of goods and/or services having the same PAN as that of ISD.
Turnover
The term 'turnover' is defined in the Explanation (c) to Sect
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opium, Indian hemp and other narcotic drugs and narcotics, but not including medicinal and toilet preparations containing alcohol or any substance included in sub-paragraph (b) of this entry.
Entry 54 of List II of the VII Schedule to the Constitution – Taxes on the sale or purchase of goods other than newspapers, subject to the provisions of entry 92A of List I. (92A – Taxes on the sale or purchase of goods other than newspapers, where such sale or purchase takes place in the course of inter-State trade or commerce. )
Manner of recovery of credit distributed in excess
Section 21 of the Bill provides that where the ISD distributes the credit in contravention of the provisions contained in Section 20 resulting in excess distribution of credit to one or more recipients of credit, the excess credit to distributed shall be recovered from such recipients along with interest, and the provisions of Section 73 or Section 74, as the case may be, shall mutatis mutandis, apply for determinatio
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