Input Service Distributor under GST
The definition of Input Service Distributor under the previous tax regime includes, “an office of the producer/ manufacturer of final products or one who provides output services
- Which receives invoices that are issued under 4A rule of Service Tax Rules 1994 for the purchase of input services and,
- Issues challan, bill or invoice for the distribution of service tax paid credit on said services to such producer or manufacturer. “
Therefore, available CENVAT to ISD is distributed to its units and manufacturers outsourced. In parallel lines to the existing structure, GST has also kept the concept of Input Service Distributor aligned in the similar way.
Input Service Distributor under GST model includes, an office of supplier of services/goods
- That receives invoices of taxes issued by the supplier for receipt of goods/ input services and,
- Issues documents for distribution of CGST credit (SGST in state acts) or/ and IGST paid on said services to the supplier who sells taxable services/ goods under same PAN as that of the office referred above.
Differences under the Two Models
A document can be issued by ISD to any other office bearing the same PAN as that of ISD. Credit can’t be distributed to service providers or outsourced manufacturers unlike previous tax model. This could probably because of the reason that there is a shift of taxable event to supply from manufacture. The liability of tax will be raised at the time of supply which will be borne by the ISD when available input tax credit limit is utilized.
Registration and Filing of Return under GST
- Migration of existing registration won’t apply to Input Service Distributor which means a fresh application for registration is required. Therefore, unlike the previous scenario, a taxpayer needs to apply for “supplier of service” and “Input Service Distributor” simultaneously. For the process of application, a separate registration number will be provided.
- In the case of registration as an Input Service Distributor, return is to be filed by the 13th of the next month and for registration as supplier of service same should be done on 20th of next month.
Conditions for Distribution of Credit
- Issue of prescribed documents to the credit receipts which contain prescribed details
- Amount of credit distributed should be less than available amount for distribution
- The credit for the tax paid on input services concerned to a recipient of credit can be given only to the same recipient.
- The credit for the tax paid on input services concerned to more than one recipient of credit can be distributed only to the recipients to whom the input service is concerned and such distribution needs to be done pro rata as per the guidelines.
Recovery of Inappropriate Distribution of Credit by ISD under GST
As per the GST law, following shall be termed as inappropriate distribution of tax credit by the Input Service Distributor:
- Excess credit distribution to any or all recipients than that available for distribution
- Inappropriate ratio used for distribution to the recipients
- Excess distribution than the entitlement
Such inappropriate distribution shall be recovered from the recipients(s) with applicable interest and recovery provisions will apply as per rule 66 or 67.
Transitional Provisions
- The input tax credit for any service which is received before the appointed day will be eligible for the process of distribution as credit despite of the receipt of invoice being done on or after the appointed date.
- The amount of the input tax credit which has been filed under previous law and carried forward, will be allowed under GST law
- Distribution of credit is made only to the services that are received before appointed date but invoice is received later. For cases where the services have been received after the appointed date and invoice is also received later, such services will be booked for the first time and transition provisions won’t be applicable here.