Concept of Input Service Distributor in GST
GST FAQ 3rd Edition – December, 2018 – GST Frequently Asked Questions (FAQs)
GST
11. Concept of Input Service Distributor in GST
\nQ 1. What is Input Service Distributor (ISD)?
\nAns. ISD means an office of the supplier of goods or services or both which receives tax invoices towards receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax (CGST), State tax (SGST)\/ Union territory tax (UTGST) or integrated tax (IGST) paid on the said services to a supplier of taxable goods or services or both having same PAN as that of the ISD.
\nQ 2. What are the requirements for registration as ISD?
\nAns. An ISD is required to obtain a separate registration even though it may be separately registered. The threshold limit of registration is not applicable to ISD. The registration of ISD under the existing regime (i.e. under Service Tax) would not be migrated in GST regime. All the existing IS<\/p>\n
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\nQ 6. It is not possible many a times to establish a one-to-one link between quantum of input services used in the course or furtherance of business by a supplier. In such situations, how distribution of ITC by the ISD is to be done?
\nAns. In such situations, distribution would be based on a formula. Firstly, distribution would be done only amongst those recipients of input tax credit to whom the input service being distributed are attributable. Secondly, distribution would be done amongst the operational units only. Thirdly, distribution would be done in the ratio of turnover in a State or Union territory of the recipient during the period to the aggregate of all recipients to whom input service being distributed is attributable. Lastly, the credit distributed should not exceed the credit available for distribution.
\nQ 7. What does the turnover used for ISD cover?
\nAns. The turnover for the purpose of ISD does not include any duty or tax lev<\/p>\n
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\nQ 12. Whether SGST \/ UTGST credit can be distributed as IGST credit by an ISD to recipients located in different States?
\nAns. Yes, an ISD can distribute SGST \/UTGST credit as IGST for the recipients located in different States.
\nQ 13. How are integrated tax, central tax and state tax to be distributed?
\nAns. The distribution is to be made by an ISD as per following criteria:
\n(a) Integrated tax as integrated tax.
\n(b) Central tax as central tax (if the recipient and ISD are located in the same State) and as integrated tax (if the recipient and ISD are not located in the same State).
\n(c) State tax as state tax (if the recipient and ISD are located in the same State) and as integrated tax (if the recipient and ISD are not located in the same State). In case of distribution of central\/ state tax as integrated tax, it should be ensured that the amount distributed equals the amount of credit of central and state tax put together
\n(Section<\/p>\n
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\n(b) The amount of credit distributed shall not exceed the amount of credit available for distribution;
\n(c) The credit of tax paid on input service attributable to a recipient of credit shall be distributed only to that recipient;
\n(d) If credit is attributable to more than one recipient, then it shall be distributed among such recipient(s) to whom the input service is attributable on pro rata basis of the turnover in a State of such recipient during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable.
\n(e) If credit is attributable to all recipients, the above method of allocation on pro rata may be applied with reference to all recipients, which are operational in current year (Section 20(2) of the CGST Act, 2017)
\nQ 17. Whether ineligible credit should be distributed by an ISD?
\nAns. The Input Service Distributor has to separately distribute the amount of ineligible input tax credit, under the provisions <\/p>\n
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\n(Rule 39(1) (j) of the CGST Rules, 2017)
\nQ 21. Whether the excess credit distributed could be recovered from ISD by the department?
\nAns. No. Excess credit distributed can be recovered along with interest only from the recipient and not ISD. The provisions of under section 73 or 74 would be applicable for the recovery of credit.
\nQ 22. What are the consequences of credit distributed in contravention of the provisions of the Act?
\nAns. The credit distributed in contravention of provisions of Act could be recovered from the recipient to which it is distributed along with interest.
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