TaxTMI 
TaxTMI 
Introduction - Manner of distribution & recovery of ITC by Input Service Distributor in GST [section 20 & 21 of CGST Act]
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....ly. The Head Office would be procuring certain services which would be for common utilization of all units across the country. The bills for such expenses would be raised on the Head Office. But the Head Office itself would not be providing any output supply so as to utilize the credit which gets accumulated on account of such input services. * Since the common expenditure is meant for the business of all units, it is but natural that the credit of input services in respect of such common invoices should be apportioned between all the consuming units. ISD mechanism enables such proportionate distribution of credit of input services amongst all the consuming units. Legal Provision relating to Input Service Distributor * Compulsoril....
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....ay be registered separately; Since the services relate to other locations the corresponding credit should be transferred to such locations (having separate registrations) as the output services are being provided there. [ Again Amended vide Section 125 of the Finance Act, 2025 ] * Scope of Input Services Covered [ Section 20(2) of CGST Act ] - From 01.04.2025 - The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject to levy of tax under Section 9(3) or (4) of CGST Act paid by a distinct person registered in the same State as the said Input Service....
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....nd where required, after adding, correcting or deleting the details, furnish electronically the return in FORM GSTR-6, containing the details of tax invoices on which credit has been received and those issued under section 20, through the common portal either directly or from a Facilitation Centre notified by the Commissioner. * Manner of recovery of credit distributed in excess [ Section 21 of CGST Act ] [ For more Details refer this chapter ] * Penalty imposed on ISD [ Section 122(1)(ix) of CGST Act, 2017 ] - Where a taxable person who takes or distributes input tax credit in contravention of section 20, or the rules made thereunder; he shall be liable to pay a penalty of Rs. 10,000/- or an amount equivalent to th....
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....s to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period; (e) the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operation....