Understanding Input Service Distributor (ISD) in GST
It is quite common that businesses have a distributed system of manufacturing units or service rendering units across the nation. In simple words, businesses with Head Offices (HO) and Branch Offices (BO) which are spread across the nation – could be in the same state or a different state. Under this system, in order to have better operational efficiency and control, usually businesses adopt centralized billing for procurement of common services at the HO. This situation leads to the accumulation of input tax credit paid on common inward supplies which are used by the branch units.
In order to avoid the aforesaid situation, the concept of Input Service Distributor (ISD) was introduced in CENVAT credit rules, which allows the HO to distribute the input tax credit to eligible units which are engaged in manufacturing or rendering of taxable services. The HO, which does the centralized billing for procurement of common services is termed as the ‘Input Service Distributor’.
In order to distribute the credit, the HO has to obtain a separate registration as an ISD, and file half yearly return.
As an ISD, the HO mainly performs the following:
- Receives service tax invoice for availing common input services
- Distributes the input tax credit to eligible units by issuing an invoice/challan, as required.
Input Service Distributor under GST
The concept of Input Service Distributor (ISD) is provided in GST too. It is defined as ‘an office of supplier of goods and/or services, which has received input services under the cover of tax invoice, and is allowed to distribute the said tax credit to the supplier of goods and/or services registered under the same PAN’. This indicates that the ISD is an office:
- Which can be a head office, administrative office, corporate office, regional office, depot, and so on, belonging to registered taxable person who intends to distribute the credit
- Which receives tax invoices towards the receipt of inward supply of services
- Which distributes the tax credit paid of inward supplies of services to the branch units which have consumed the services, and issues invoices for the distribution of credit
Registration under GST
An ISD is required to obtain a separate registration. The registration is mandatory and there is no threshold limit for registration for an ISD. Businesses who are already registered as an ISD under the existing regime (i.e. under Service Tax), will be required obtain a new ISD registration under GST. This is because, the existing ISD registration will not be migrated to the GST regime.
Businesses who are already registered as an Input Service Distributor under the existing regime (i.e. under Service Tax), will be required obtain a new ISD registration under GST.Click To TweetManner of Distribution
Under GST, on an intrastate transaction, CGST and SGST will be applicable. In case of transaction within a union territory, CGST and UTGST will be applicable. IGST will be applicable in case of interstate transactions and imports. The following are the scenarios of distribution of credit by an ISD:
- ISD and the recipient of credit are located in the same state
- ISD and the recipient of credit are located in different states
The unit to which the input tax credit is distributed is referred to as the ‘recipient of credit’.
ISD and recipient of credit are located in the same state
When the ISD and recipient of credit are located in the same state/union territory, the input tax credit of IGST, CGST, SGST, and UTGST should be distributed to the recipient in the following manner:
*Applicable on transactions within a union territory
Let us understand with an example.
Top-In-Town Home Appliances Ltd, is located in Bangalore, Karnataka. They also have units located in Mysore, Chennai and Mumbai. The unit in Bangalore is the Head Office and registered as an ISD. They do bulk procurement of common services which are used by the other units too.
Top-In-Town Home Appliances Ltd (HO) receives an invoice of Rs.1,00,000 with GST of Rs.18,000 (CGST Rs.9,000 + SGST Rs.9,000) towards advertisement services provided exclusively to the Mysore unit.
The credit will be distributed as CGST Rs.9,000 and SGST Rs.9,000.
Recipient of credit and ISD are located in different states
When the ISD and the recipient of credit are located in different states/union territory, the input tax credit of IGST, CGST, SGST, and UTGST should be distributed to the recipient of credit in the following manner:
For example, Top-In-Town Home Appliances Ltd (HO) receives an invoice of Rs.1,00,000 with a GST of Rs.18,000 (CGST 9,000 + SGST 9,000) towards advertisement services provided exclusively to the Chennai unit.
The credit of CGST Rs. 9,000 and SGST Rs. 9,000 will be distributed to the Chennai unit as IGST, Rs. 18,000.
Return Forms under GST
| Return Type | Frequency | Due Date | Details to be furnished |
|---|---|---|---|
| Form GSTR-6A | Monthly | 0n 11th of succeeding month | Details of inward supplies made available to the ISD recipient on the basis of FORM GSTR-1 furnished by the supplier |
| Form GSTR-6 | Monthly | 13th of succeeding month | Furnish the details of the input credit distributed |
The concept of ISD in GST is similar to the provisions existing under CENVAT credit rules and Service Tax. In this blog we have discussed about the fundamentals of an ISD in GST. Watch out for our next blog to know how to distribute the credit to the recipient of credit.
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Author: Yarab A
Yarab is associated with Tally since 2012. In his 7+ years of experience, he has built his expertise in the field of Accounting, Inventory, Compliance and software product for the diverse industry segment. Being a member of ‘Centre of Excellence’ team, he has conducted several knowledge sharing sessions on GST and has written 200+ blogs and articles on GST, UAE VAT, Saudi VAT, Bahrain VAT, iTax in Kenya and Business efficiency.
73 Comments
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I am registered as wholeseller in GST now I want to add ISD in GST.How can I do?
You have apply for new ISD registration in GST.
sir,
a chit fund company had deducted 3500/- as a GST , were we have to show this in GSTR-3 B , and How we get credit of this Amount
If the amount deducted is against some services rendered by Chit fund company and if it is in the course or furtherance of business, you can treat as ITC and can be shown under 4(5) of Form GSTR-3B. Else it will your expenses.
Dear Sir,
We have RO at Cochin and Ho at Mumbai. We deal in software services both in export as well as domestic. All the invoices, and compliances are handled by Mumbai office. How can we transfer ITC from cochin to mumbai office. Please clarify.
You have to apply for ISD registration in Cochin branch and through a tax invoice, you will be allowed to distribute the input tax credit.
Thank You Very much ..
Tax invoice issued from cochin office or mumbai office?
We have GSIN for both Cochin office and mumbai office.
now will cochin office registred as ISD?
What is the format of ISDN. Is similar to GSTIN. How to identify if the number is GSTIN & ISDN
Yes, ISDN is similar to GSTIN. You cannot differentiate unless some options are made available at GST Portal.
How can ISD distribute ITC of GST paid on RCM basis?
Please read How to Distribute Input Tax Credit
Can we register now ISD??
Yes, you can apply for ISD registration from GST Portal
how to get input tax credit of Excise duty & CST paid goods available in stock as of June 30th. is there any published format to submit purchase / stock list
Please read Moving to GST: Can I Avail Input Credit on Closing Stock? and Taxes Eligible for ITC on Opening Stock of 1st July
I am not a ISD.
Our employees travel a lot both domestic (within India) and overseas.
Case 1 : Our MD uses Jet Privilage card and most of his tickets are booked through his card and earns points (JP miles). The tickets submitted does not specify IGST/CGST/SGST. How GST is charged on passengers. How they classify whether Intra/Inter State?
Case 2
We use our travel agent to book our official train tickets. Agent will raise invoice adding ticket cost & his service charges (say Rs 200 per tatkal). He will charge GST only on his service charges (Rs 200) Tickets will be in name of our traveler(employee) and invoice will be raised on Company
Now, how to claim the ITC suffered on the ticket. Are the agents are empowered to pass on the GST suffered on tickets to me by charging GST on ticket charge+his service charges? and claim as ITC
Case 3
Employees buy tickets of their own and then submit the tickets for reimbursement. How to claim ITC on such tickets.
Likewise Travel Insurance policies (Overseas Mediclaim Policy)
Case-1 : Please read How to Determine the Place of Supply of Transportation Services
Case-2 and 3: You can claim ITC if the invoice is in the name of your company.
If all the offices and factories are in the same state, is ISD registration necessary ?
Not required.
Is this explanation stands void for travel agency too which is into providing services of booking hotel rooms ? If a hotel is located in Goa, Head office of booking agency is in Delhi , can we open an ISD in Goa and avail Input credit for head office using ISD ?
If yes…. Incase we are selling that service to another travel agent (b2B) can we pass that credit to that travel agent aswell ?
Yes, if all of your businesses registered in different state are under same PAN. In case of another agent, you cannot distribute the credit, since it is separate entity registered under different PAN.
how to take ISD registration in gst regime all let me know the process and documents as well.
Hope you would have registered by now. If not,please refer ISD Registration
we have a office in new delhi just for providing wok station o sales persons. Can we take registration of delhi office as input service distributor to take input tax credit of gst paid on rent? how?
Yes, you have to register has ISD.
How do we enter Packing & Forwarding Charges in Tally Sale Invoice under GST also how do we enter Cartage amount which we charge in Invoice. Please show the process of Creating of Ledger under which group?
To calculate GST on packing and forwarding charges, please set GST Applicable to No and enable Include assesable value calculation. To know more, please read the help articles available in TallyHelp
i am purchase tamil nadu, my project is also kerala, purchase material direct supply kerala . how to process in gst which under this translocation ?? please help me
Need some more details on project you are running and location of your businesses. This will help us to analyze and answer your query.
Dear sir, in case of ISD and receipient (SEZ) being same state , how to transfer credit of CGST and SGST?
is it in the form of CGST and SGST only or is it in the form of IGST.
CGST should be distributed as CGST and SGST should be distributed as SGST.
if any customer book materials by advanced paid tax but when he remaining amount he paid again tax or one time tax payment
If the value of supply is more than the advance received, you need to charge only on excess amount.
i have a registration in kanpur for services and i want to host an event in bangalore so how will be the credit flow of taxes, i donot have any registration in bangalore.
a.if i want to host events in different states do i need registration in all states and show kanpur as ISD
b.what will be the tax flow.
Yes, you need to take separate registration in each state from where the outward supply of service are made. You can also explore the option of taking casual dealer registration.
can ISD registration make payment of common service on which tax is payable under reverse charge and distribute the same
Yes, they can do as per the conditions prescribed.
If i stays in hotel for business purpose in Rajasthan and Gujrat and pay CGST and SGST, can i take set off of these credit against my Maharashtra’s output Liability. As i can not transfer CGST and SGST from one state to another state. so for this i have to take ISD registration for Gujrat and Rajasthan for transfer of ITC where i have no place of business available in Rajasthan and Gujrat. how to manage this type of situations and problems..
Taking ISD registration may not be beneficial in the above case. You have to treat it as expenses.
Hello,
what is IGST, CGST,SGST & UTGST please detial information me ?
We suggest you to refer our blog on this http://blogs.tallysolutions.com/how-gst-different-from-current-tax-structure/
Top-In-Town Home Appliances Ltd, is located in Bangalore, Karnataka. They also have units located in Mysore, Chennai and Mumbai. The unit in Bangalore is the Head Office and registered as an ISD. They do bulk procurement of common services which are used by the other units too.
Top-In-Town Home Appliances Ltd (HO) receives an invoice of Rs.1,00,000 with GST of Rs.18,000 (CGST Rs.9,000 + SGST Rs.9,000) towards advertisement services provided exclusively to the Mysore unit.
The credit will be distributed as CGST Rs.9,000 and SGST Rs.9,000.
In this eg. instead of services consumed at Mysore unit there would be Bangalore unit. As it is the eg. of ISD and recipient of credit are located in same states.
in case of Import goods (out side India) what is the format of taxation which part of tax will creditable in import purchase be clear in detail
IGST needs to paid on import of goods. To know more, please read How are Imports and Exports Treated in GST
In case of services business :- Scenario – Head office Mumbai places order for software and installed at head-office. Branch / Factory and Sales offices are in Bangalore and Chennai. How can we take input credit on out put taxes (sales ) occured in Bangalore and Chennai?
Can you explain this please?
Is ISD registeration also open for the current period 1st june to 15th june. As we have all our Business locations in Uttarakhand and just one showroom in New Delhi , do we also need to get registered under ISD
Registration as an ISD is an option. It is not mandatory.
How do you justify it is not mandatory, any legal backing ?
You can refer Section 24(Viii) of CGST ACT. It is a compulsory registration for ISD.
How to take the input vat credit of the purchases made before 30.06.2017 and which are in stock
We suggest you to refer our blog on this http://blogs.tallysolutions.com/input-credit-closing-stock-gst-transition/
In case a R&D unit in one state and factories are situated in more than one state, then R&D is to be classified as ISD. If so can the same be included along with HO ISD or separate Registration is required
Separate registration for ISD is required.
30 June stock and input vat what’s treatment in GST
We suggest you to refer our blogs http://blogs.tallysolutions.com/input-credit-closing-stock-gst-transition/ and http://blogs.tallysolutions.com/gst-transition-registered-businesses/
Very useful and simplified
It is very useful and simplified.
i have query that ” let we have inward supply of Rs 10000 (goods 9000+freight 1000) & the same goods outward supply in 8000 what will the gst return for us.
If common service for all branches is received by HO then how to distribute the same among all branches or units
Please read our blog How to Distribute Input Tax Credit
Thanks for the information.
But due dates to file returns are 10th and 15th
is there any provision to claim already paid excise duty and cst in existing stock in hand under New GST ?
CST will not be allowed as transitional credit. To Know How to claim excise duty credit, please read How to File Form GST TRAN-1: Part 3
Is this system is applicable for only services or for goods also…
It is only for services
If the system is applicable to service only so what about goods.
very proper explanation
in detailed explanation thanks for the team
Well explained.
A query: Is it mandatory that a co. having HO in West Bengal & branches in other states & having common input services has to get registered as ISD under GST law & only then it can utilize/DISTRIBUTE ITC?
Or is it open to the co.’s HO not to take registration as ISD under GST law & to utilize entire ITC itself without distributing it to branches ?
It is not mandatory to register as ISD. However,as a business, if your see benefit in distributing Input tax credit and if you wish to distribute, you need to register as ISD.
Thank you Tally for providing ISD Information….