Input service distributor (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 purpose of distributing the credit of CGST, SGST, UGST, IGST paid on the said services to a supplier of taxable goods or services or both having same PAN as that of the ISD.
ISD mechanism is meant only for distributing the credit on common invoices pertaining to input services only and not goods (inputs or capital goods). The concept of ISD under GST is a legacy carried over from the Service tax regime. An ISD will have to compulsorily take a separate registration as such ISD and apply for the same in form GST REG – 01. There is no threshold limit for registration for an ISD.
For the purpose of distributing the input tax credit, an ISD has to issue and ISD invoice, clearing indicating in such invoice that it is issued only for distribution of input tax credit. The input tax credit available for distribution in a month shall be distributed in the same month and details furnished in FORM GSTR – 6. Further, an ISD shall separately distribute both the amount of ineligible and eligible ITC.
The credit has to be distributed only to the unit to which the supply is directly attributable to. If input services are attributable to more than one recipient of credit, the distribution shall be in the pro rata basis of turnover in the State/ Union Territory.
An ISD will have to file monthly returns in GSTR 6 within 13 days after the end of the month and will have to furnish information of all ISD invoices issued. [Due date of GSTR 6 for the months from July 2017 to Aug 2018 is extended to 30th September 2018] The details in the returns will be made available to the respective recipients in their GSTR 2A.The recipients may include these in GSTR 2 and take credit. An ISD shall not be required to file Annual return. An ISD cannot accept any invoices on which tax is to be discharged under reverse charge mechanism. This is because the ISD mechanism is only to facilitate distribution of credit of taxes paid.
The concept of ISD is a facility made available to business having a large share of common expenditure and billing/ payment is done from a centralized location. The mechanism is meant to simplify the credit taking process for entities and the facility is meant to strengthen the seamless flow of credit under GST.
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