ISD registration - RCM security invoice received - how to pay

[Guuruswamy Raman]

We have one ISD registration - we received RCM invoice (security ). how to pay the GST RCM amount and claim ITC

[Sadanand Bulbule]

RCM liability cannot be paid thorugh ISD registration. It has to be discharged by the regular GST registration in cash and ITC can thereafter be availed and distributed through ISD, if eligible.

[Sadanand Bulbule]

Refer the following:

2026 (4) TMI 1044 - KARNATAKA HIGH COURT

M/s. MICRO LABS LIMITED Versus JOINT COMMISSIONER OF CENTRAL GST OFFICE OF THE COMMISSIONER OF CENTRAL GST PUNE-II, JOINT/ADDITIONAL COMMISSIONER OF CENTRAL TAX BENGALURU AND JOINT/ADDITIONAL COMMISSIONER OF COMMERCIAL TAXES BENGALURU

[YAGAY andSUN]

Under GST law, an Input Service Distributor (ISD) registration cannot discharge liability under Reverse Charge Mechanism (RCM). In cases where services such as security services are received and are liable to GST under RCM, the tax must be paid by a regular GST registration and not through the ISD GSTIN. Since an ISD registration is only meant for distribution of input tax credit (ITC) and does not file GSTR-3B or maintain an electronic cash ledger for tax payment, it is legally not permitted to pay RCM liability. Accordingly, the regular GST registration of the company should discharge the RCM liability in cash through the electronic cash ledger, report the same in GSTR-3B, and thereafter avail eligible ITC subject to Section 16 conditions of the CGST Act. Once the ITC is validly availed by the regular registration, the same may be distributed to other units through the ISD mechanism by issuing ISD invoices in accordance with Rule 39 of the CGST Rules, wherever the input services pertain to multiple branches or registrations. Thus, the correct legal sequence is: payment of RCM by the regular GST registration availment of ITC distribution of credit through ISD, if eligible. This position has been affirmed by the Karnataka High Court in M/s. Micro Labs Limited vs Joint Commissioner of Central GST, wherein the Court held that an ISD registration is merely a mechanism for distribution of credit and cannot be treated as a taxable person for payment of RCM liability.

AI Summary

Input tax credit and reverse charge compliance for ISD registration when a security invoice is received. ISD registration raises a compliance issue where a registered input service distributor receives a reverse charge mechanism invoice for security services and seeks the correct method for discharging the GST liability and claiming input tax credit. The operative concern is the manner of payment of the reverse charge amount in relation to the ISD registration and the corresponding treatment of ITC under GST compliance requirements.