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Concept of Input Service Distributor in GST


Q 1.   What is Input Service Distributor (ISD)?

Ans.      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.

Q 2.   What are the requirements for registration as ISD?

Ans.    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 ISDs will be required to obtain fresh registration under new regime in case they want to operate as an ISD.

Q 3.   What     are    the documents for distribution of credit by ISD?

Ans.    The distribution of credit would be done through a document especially designed for this purpose. The said document would contain the amount of input tax credit being distributed.

Q 4.   Can an ISD distribute the input tax credit to all suppliers?

Ans.  No.  The  input  tax  credit  of  input  services  shall  be distributed  only  amongst  those  registered  persons  who have used the input services in the course or furtherance of business.

Q 5.   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?

Ans. 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.

Q 6.   What does the turnover used for ISD cover?

Ans. The turnover for the purpose of ISD does not include any duty or tax levied under entry 84 of List I and entry 51 and 54 of List II of the Seventh Schedule to the Constitution. 

Q 7.   Is the ISD required to file return?

Ans.   Yes, ISD is required to file monthly return by 13th of the following month.

Q 8.   Can a company have multiple ISD?

Ans.    Yes, different offices like marketing division, security division etc. may apply for separate ISD.

Q 9.   What   are   the   provisions   for   recovery   of excess/wrongly distributed credit by ISD?

Ans. The excess/wrongly distributed credit can be recovered from the recipients of credit along with interest by initiating action under section 73 or 74.

Q 10.      Whether     CGST     and     IGST     credit     can be distributed by ISD as IGST credit to recipients located in different States?

Ans.    Yes, CGST credit can be distributed as IGST and IGST credit can be distributed as CGST by an ISD for the recipients located in different States.

Q 11.      Whether   SGST    /    UTGST   credit   can   be distributed as IGST credit by an ISD to recipients located in different States?

Ans.      Yes, an ISD can distribute SGST /UTGST credit as IGST for the recipients located in different States.

Q 12.      Whether  the  ISD  can  distribute  the  CGST and IGST Credit as CGST credit?

Ans.    Yes, CGST and IGST credit can be distributed as CGST credit by an ISD for the recipients located in same State.

Q 13.   Whether   t h e   S G S T /    U T G S T    a n d    I G S T C r e d i t    c a n    be    distributed   as   SGST/UTGST credit?

Ans.       Yes,  ISD can  distribute SGST and IGST credit  as SGST  / UTGST credit  for the recipients located in same State.

Q 14.   How to distribute common credit  among all the recipients of an ISD?

Ans. The common credit used by all the recipients can be distributed by ISD on pro rata basis i.e. based on the turnover of each recipient to the aggregate turnover  of all the recipients to which credit is distributed.

Q 15.   The ISD may distri but e the CGST a nd IGST credit to recipient outside the State as

(a) IGST 

(b) CGST

(c) SGST

Ans.    (a) IGST.

Q 16.   The ISD may distribute the CGST credit within the State as_     

(a) IGST (b) CGST (c) SGST

(d) Any of the above.

Ans.    (b) CGST.

Q 17.   The credit of tax paid on input service used by more than one supplier is   

(a)    Distributed among the suppliers who used such input service on pro rata basis of turnover in such State.

(b)  Distributed equally among all the suppliers.

(c)  Distributed only to one supplier.

(d)   Cannot be distributed.

Ans.    (a) Distributed among the suppliers who used such input service on pro rata basis of turnover in such State.

Q 18.   Whether the  excess  credit  distributed  could be recovered from ISD by the department?

Ans.       No.   Excess credit distributed can be recovered along with interest only from the recipient and not ISD. The provisions of section 73 or 74 would be applicable for the recovery of credit.

Q 19.   What are the consequences of credit distributed in contravention of the provisions of the Act?

Ans.    The credit distributed in contravention of provisions of Act could be recovered from the recipient to which it is distributed along with interest.