Common input tax credit can be distributed by tax invoice, and ISD was not mandatory for the relevant period.

Common input tax credit on services procured by a head office for multiple State registrations could be distributed either through the Input Service Distributor mechanism or by issuing tax invoices under section 31 of the CGST Act for the relevant period. The then-applicable definition of Input Service Distributor did not expressly cover credit relating to reverse charge services, and the binding circular clarified that ISD was not the only permissible route. Recipient units could avail credit subject to sections 16 and 17. On that basis, a demand built on mandatory ISD distribution alone was unsustainable.

---

---

Issues: (i) Whether, for the relevant tax period, common input tax credit in respect of services procured by the head office could be distributed to branch offices either through the Input Service Distributor mechanism or by issuing tax invoices under section 31 of the Central Goods and Services Tax Act, 2017.

Analysis: The Head Office procured common input services used by multiple State registrations. The statutory definition of Input Service Distributor under section 2(61) of the Central Goods and Services Tax Act, 2017, as it then stood, did not expressly cover credit relatable to services on which tax was paid under reverse charge mechanism. The Board's circular clarified that distribution of common input service credit through the ISD route was not mandatory and that the Head Office could also issue tax invoices under section 31 of the Central Goods and Services Tax Act, 2017, with the recipient units availing credit subject to sections 16 and 17. The circular being binding on the departmental authorities, the impugned demand, which proceeded on the premise that ISD was the only permissible mode, could not be sustained.

Conclusion: The alternative distribution of common input tax credit by issuing tax invoices was lawful, ISD was not mandatory for the relevant period, and the demand confirmation was unsustainable.

---