AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 1044
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....ute the ITC relating to common input services; c) hold that the ITC availed by the recipient units in the other States on the strength of the invoices issued by the Petitioner was in accordance with law; d) hold that the interest under Section 50 of the CGST Act for the period from July 2017 to March 2022, on the alleged improper distribution or availment of ITC and/ or availment of ITC by the recipient units is not payable as demanded; e) hold that the multiple penalties in terms of Section 74 and Section 122 of CGST Act and Section 20 of IGST Act are not imposable as confirmed; f) Pass such further order(s) and other reliefs as the nature and circumstances of the case may require." 2. A perusal of the material on record will indicate that the petitioner is engaged in the manufacture and supply of pharmaceutical products, capsules, eye drops etc., and other active pharmaceutical ingredients. The petitioner is headquartered in Bangalore and for the manufacture and sale of such pharmaceutical products, petitioner procures various services which are utilised by all the State GST registrations of the petitioner, who is registered under the C....
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....al hearing on 30.12.2024 in the proceedings and filed written submissions. Meanwhile, the Ministry of Finance issued a Circular No. 199/11/2023-GST dated 17.07.2023, which clarified that distribution of common credit through ISD is not mandatory and the same can be transferred by raising Tax Invoices as per Section 31 of the CGST Act. By the impugned order dated 24.01.2025, the respondents confirmed the demands raised in the show cause notice against the petitioner, who is before this Court by way of the present petition. 6. Heard learned counsel for the petitioner, learned counsel for respondents 1 and 2 as well as learned HCGP for respondent No.3 and perused the material on record. 7. Before adverting to the rival contentions, it would be necessary to refer to the definition of 'Input Service Distributor (ISD)' under Section 2(61) of the CGST Act, 2017 (prior to amendment), which reads as under; Definitions. 2. (61) "Input Service Distributor" means an office of the supplier of goods or services or both which receives tax invoices issued under Section 31 towards the receipt of input services and issues a prescribed document for the purposes of dist....
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....) located in other States. The HO procures some input services e.g. security service for the entire organisation from a security agency (third party). HO also provides some other services on their own to branch offices (internally generated services). 3. The issues that may arise with regard to taxability of supply of services between distinct persons in terms of sub-section (4) of section 25 of the CGST Act are being clarified in the Table below: - S.No Issues Clarification 1. Whether HO can avail the input tax credit (hereinafter referred to as 'ITC') in respect of common input services procured from a third party but attributable to both HO and BOs or exclusively to one or more BOs, issue tax invoices under section 31 to the said BOs for the said input services and the BOs can then avail the ITC for the same or whether is it mandatory for the HO to follow the Input Service Distributor (hereinafter referred to as 'ISD') mechanism for distribution of ITC in respect of common input services procured by them from a third party but attributable to both HO and Bos or exclusively to one or more BOs? ....
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....provided by HO to BOs. Whether the HO is mandatorily required to issue invoice to BOs under section 31 of CGST Act for such internally generated services, and/ or whether the cost of all components including salary cost of HO employees involved in providing the said services has to be included in the computation of value of services provided by HO to BOs when full input tax credit is available to the concerned BOs. The value of supply of services made by a registered person to a distinct person needs to be determined as per rule 28 of CGST Rules, read with sub-section (4) of section 15 of CGST Act. As per clause (a) of rule 28, the value of supply of goods or services or both between distinct persons shall be the open market value of such supply. The second proviso to rule 28 of CGST Rules provides that where the recipient is eligible for full input tax credit, the value declared in the invoice shall be deemed to be the open market value of the goods or services. Accordingly, in respect of supply of services by HO to BOs, the value of the said supply of services declared in the invoice by ....
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....the petitioner as per the proportionate turn over of the branch offices. According to the respondents, the units of the petitioner in other States including the Amritsar Unit were availing ITC on the invoices issued by the Head office i.e., the petitioner without receipt of underlying services and that common credit, if any, has to be necessary transferred through ISD mechanism and the same cannot be crossed / charged by a regular GST registration of the petitioner who ought to have distributed common ITC through ISD and that there was no underlying supply provided by the petitioner when they raised tax invoices under Section 31 of the CGST Act to distribute common ITC. In this context, it is pertinent to note that GST on such input services is paid either under FCM or RCM and for the purpose of transfer of ITC relating to common input services, the CGST contemplates distribution through ITC mechanism. However, during the aforesaid tax periods / financial years i.e., 2017-18 to 2021-22, the petitioner could not have procure input services on which GST was payable under RCM in view of the specific bar / prohibition in terms of the aforesaid definition of ISD under Section 2(61) of t....