Input Service Distributor in GST

Source-This post on Input Service Distributor has been created based on the article “Finance Bill 2024: Know Proposed manner of Distribution of Credit by Input Service Distributor under GST” published in “TAXSCAN” on 1 February 2024.

Why in The News?

An amendment has been proposed under Finance Bill 2024 for mandatory Input Service Distributor registration of an office, which receives invoices for common input services.

About Input Service Distributor

1) It is a taxpayer that receives invoices for services used by its branches. It distributes the tax paid, known as the Input Tax Credit (ITC), to such branches on a proportional basis by issuing ISD invoices.

2) The branches can have different GSTINs, but must have the same PAN as that of ISD.

Significance of Input Service Distributor

1)  It will ensure that the ITC is properly distributed amongst the various branches of the business

2) It will be beneficial to business having a large share of common expenditures where billing/payment is done from a centralised location.

3) It will be beneficial for businesses having multiple branches operating within India.

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Where ISD does not Apply?

1) ISD mechanism is meant only for distributing credit on common invoices pertaining to input services.
2) It is not applicable when input or capital goods are involved.

UPSC Source-Indian Economy.