Distribution of expenses and credit under GST

[Rajat Gupta]

Company X is engaged in selling goods through ECOs (Amazon at present). It has a head office (HO) in Bengaluru and multiple godowns in different states. There is no specific branch office in any other state. All godowns are maintained in the premises of Amazon only.

All the inward invoices like consultancy, legal fees, advertisement, etc. are received by the HO. My query is, can the HO choose not to allocate these charges to other branches, or is it mandatory to allocate/distribute these charges and ITC on them to the other branches?

[Shilpi Jain]

Further clarity required regarding GSTIN at other States, billing to customers done from where?

[Rajat Gupta]

Billing for all other GSTINs is done directly at the ECOMs website. So, if the goods are dispatched from the Maharashtra godown, Amazon issues an invoice from the Maharashtra GSTIN.

[Sadanand Bulbule]

Where common input service invoices (e.g., consultancy, legal, advertisement) are received at the HO but relate to multiple GST registrations (distinct persons), the law mandates distribution of such ITC through the Input Service Distributor (ISD) mechanism, and the HO cannot unilaterally retain the entire credit.

So double check who are all the beneficiaries of such common input services.

 

[Raam Srinivasan Swaminathan Kalpathi]

Dear Querist

Are the branches registered? If the answer to this is positive, kindly note that w.e.f. 01-Apr-25 obtaining ISD registration for the HO is mandatory. Heretofore, the RTP had the choice of distributing ITC either raising a cross charge invoice or through the ISD route. Kindly go through revamped provisions of Section 20r w r 54 and 39. You may also go through Circular 199 of 2023. Further, please note that although Rule 39(1) mandates distribution of "credit available for distribution in a month shall be distributed in the same month", courts have held this to be directory and not mandatory. Thanks

AI Summary

Input service distribution: HO must allocate ITC to multiple GST registrations via ISD, not retain full credit. Where common input services received at a head office benefit multiple distinct GST registrations, the credit must be distributed to those beneficiaries via the Input Service Distributor (ISD) mechanism; ISD registration for the HO is mandatory from 01-Apr-25. Although Rule 39(1) mandates monthly distribution of credit available for distribution, courts have characterised that timing requirement as directory. The HO cannot unilaterally retain the entire ITC and must identify beneficiary registrations and allocate credit through ISD in line with statutory provisions and guidance.