What is concept of Input Service distributor under GST
It is important to note that input service distributor mechanism is only for distributing the credit on common invoices pertaining to input service only not goods.The Head Office would be procuring certain services which would be for common utilization of all units across the country. The bills for such expenses would be raised on the Head Office. But the Head Office itself would not be providing any output supply so as to utilize the credit which gets accumulated on account of such input services. Since the common expenditure is meant for the business of all units, it is but natural that the credit of input services in respect of such common invoices should be apportioned between all the consuming units. ISD mechanism enables such proportionate of credit of input services amongst all the consuming units.
Input Service Distributor under GST law includes following conditions to be fulfilled
- It is the office of the supplier of goods and or services which receives tax invoices issued by supplier towards receipt of input services and/or goods and
- Issues a prescribed document for the purposes of distributing the credit of CGST (SGST in State Acts) and / or IGST paid on the said services to a supplier of taxable goods and / or services having similar PAN as that of the office referred to above
ISD can distribute the ITC subject to these conditions:
- The credit can be distributed to the recipient of credit against a document.
- The amount of ITC distributed cannot exceed the amount of ITC available for distribution
- The ITC paid on Input service attributable to more than one recipient shall be distributed among such recipient on prorate basis.
- The ITC paid on Input service attributable to all recipient shall be distributed among such recipient on prorate basis.
- Prescribed documents must be issued to the receipts of credit containing prescribed details
- Amount of credit distributed must not exceed amount available to distribution
- Credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient;
- The credit of tax paid on input services attributable to all or more than one recipient of credit shall be distributed only amongst such or all recipient(s) to whom the input service is attributable and such distribution shall be pro rata on the following basis.
- 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 and which are operational in the current year, during the said relevant period;
- if some or all recipients of the credit do not have any turnover in their States 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
PROCEDURE FOR DISTRIBUTION OF ITC BY ISD
The ITC available for distribution in a month shall be distributed in the same month and its details should be given in the FORM GSTR-6.
The ISD must distribute the eligible and ineligible ITC amount separately.
The ITC of CGST, SGST and IGST must be distributed separately.