Input Service Distributor

[RAMACHANDRA K M]

We have two manufacturing units in different states. One unit houses HO also. Accounts are centralised at HO and service tax credit of common bills like professional charges, rent, etc., is taken at HO and used in respect of Unit which houses HO. Is it mandatory to seek service tax registration as Input Service Distributor for HO and distribute the credit between two units proportionately? I feel, it is only optional as the relevant Rule uses the word 'may' and service tax guide /FAQ  of CBEC uses the word at the convenience of the business entity. The experts can kindly comment on this.

AI Summary

Head Office Not Required to Register as Input Service Distributor for CENVAT Credit Allocation Under Rules 7 and 7A. A query was raised about whether it is mandatory for a head office (HO), which manages centralized accounts for two manufacturing units in different states, to register as an Input Service Distributor (ISD) for distributing service tax credits. The concern was based on the interpretation of rules and guidance from CBEC. The response clarified that obtaining an ISD registration certificate is not mandatory; it is a facility to help allocate CENVAT credit to the units. Relevant provisions include Rule 7 and Rule 7A of the CENVAT Credit Rules, which guide the distribution based on service attribution or turnover.