Under GST, the concept of Input Service Distributor (ISD) helps businesses distribute the input tax credit (ITC) of services received at a central location (usually Head Office) to various branches or units.
It is useful when a company receives common services (like audit, consultancy, advertisement, etc.) at one place but these services are used by multiple branches.🔹 Concept of ISD
🔸ISD refers to an office of the supplier of goods or services that receives tax invoices of input services and then distributes the credit to its other branches/units.
🔸ISD is not involved in supplying goods or services themselves; it only distributes credit.
Example:
Head Office in Delhi receives a bill from a consultancy firm for services used by branches in Delhi, Mumbai, and Chennai. Instead of claiming all ITC in Delhi, the Head Office can distribute the credit proportionately using the ISD mechanism.
🔹 Legal Definition
As per Section 2(61) of the CGST Act, 2017:
“Input Service Distributor” means an office of the supplier of goods or services which receives tax invoices towards receipt of input services and issues a prescribed document for the purpose of distributing the credit of CGST, SGST, IGST or UTGST.
📌 Is ISD Mandatory?
No. ISD registration is optional.
But if a company wants to distribute ITC of services from the Head Office to branches, then ISD registration becomes mandatory.
ISD needs to take a separate GST registration, even if already registered for regular GST.
🔹 Relevant Provisions
Section 20, CGST Act Prescribes the manner of distribution of credit by ISD.
Rule 39, CGST Rules Lays down the methodology and conditions for credit distribution.
Form GSTR-6Monthly return to be filed by ISD.
It is useful when a company receives common services (like audit, consultancy, advertisement, etc.) at one place but these services are used by multiple branches.🔹 Concept of ISD
🔸ISD refers to an office of the supplier of goods or services that receives tax invoices of input services and then distributes the credit to its other branches/units.
🔸ISD is not involved in supplying goods or services themselves; it only distributes credit.
Example:
Head Office in Delhi receives a bill from a consultancy firm for services used by branches in Delhi, Mumbai, and Chennai. Instead of claiming all ITC in Delhi, the Head Office can distribute the credit proportionately using the ISD mechanism.
🔹 Legal Definition
As per Section 2(61) of the CGST Act, 2017:
“Input Service Distributor” means an office of the supplier of goods or services which receives tax invoices towards receipt of input services and issues a prescribed document for the purpose of distributing the credit of CGST, SGST, IGST or UTGST.
📌 Is ISD Mandatory?
No. ISD registration is optional.
But if a company wants to distribute ITC of services from the Head Office to branches, then ISD registration becomes mandatory.
ISD needs to take a separate GST registration, even if already registered for regular GST.
🔹 Relevant Provisions
Section 20, CGST Act Prescribes the manner of distribution of credit by ISD.
Rule 39, CGST Rules Lays down the methodology and conditions for credit distribution.
Form GSTR-6Monthly return to be filed by ISD.
🔹 Interpretation & Working Mechanism