Input Service Distribution

[Kaustubh Karandikar]

As per GST authorities, GST credit on the services which are exclusively used by Head office (Maharashtra) cannot be distributed among factories outside Maharashtra as input service distribution. e.g. Rent of HO, security services at HO, printing and stationery etc. According to them, these credits have to be distributed only to Maharashtra normal registration. Since there is no activity in Maharashtra, we used to distribute these credits to factories in sales ratio earlier to other factories outside Maharashtra. Is the stand taken by authorities correct?

AI Summary

GST Input Tax Credit Debate: Should Maharashtra Head Office Allocate Credits to Out-of-State Factories? Section 20(2)(c) in Focus. A discussion on the distribution of GST input tax credit for services used by a head office in Maharashtra raised concerns about whether credits could be allocated to factories outside the state. The GST authorities asserted that such credits should only be distributed within Maharashtra. Respondents referenced Section 20(2)(c) of the CGST Act, which mandates that credits be distributed to the recipient using them. The concept of Input Service Distributor (ISD) was explained, emphasizing its role in proportionately distributing input service credits across units. It was suggested that credits for common services be allocated based on turnover ratios, while those for specific services remain within Maharashtra.