Who needs to register as Input Service Distributor in GST

An Input Service Distributor (ISD) is essentially an office of the supplier of goods or services that receives tax invoices for input services and distributes the credit of CGST, SGST, and/or IGST paid on those services to suppliers of taxable goods or services with the same PAN.

Here are examples of entities that may need to register for GST as an ISD:

Head Office (HO) with Branch Offices (BO): When a head office procures input services from a third party that are attributable to both the HO and one or more branch offices, the HO may need to register as an ISD. The GST Council has recommended making the ISD procedure mandatory for this scenario.
Businesses with Multiple Distinct Persons: An office of a supplier that receives tax invoices for input services for or on behalf of distinct persons (entities with separate GST registrations under the same PAN) must register as an ISD.
Interim Resolution Professionals (IRPs)/Resolution Professionals (RPs): When an IRP/RP is appointed to undertake corporate insolvency resolution proceedings for Corporate Debtors, they may need to register as an ISD.

Here are examples of when an entity needs to register for GST as an Input Service Distributor (ISD), based on different scenarios of Head Office (HO) and branch setups:

HO and Branches with Multiple GSTINs in the Same State with the Same PAN: If a Head Office (HO) and its branches have multiple GSTINs within the same state but operate under the same PAN, and the HO receives input services, the input tax credit (ITC) on which is attributable to all the entities, the HO is required to register as an ISD. The ISD mechanism is used to distribute the ITC to the respective branches.
HO and Branches with Multiple GSTINs in Multiple States with the Same PAN: If the HO and its branches have GSTINs in multiple states under the same PAN, and the HO receives input services, the ITC of which is attributable to all the entities, the HO is required to register as an ISD. The HO, as an ISD, distributes the ITC to the branches located in different states. The amendments to CGST Act explicitly include inter-state Reverse Charge Mechanism (RCM) transactions under the ISD mechanism.
Only One State and One GSTIN: If the business has operations only in one state and has a single GSTIN, it generally does not need to register as an ISD.

The ISD mechanism is designed for businesses with multiple distinct persons (entities with separate GST registrations under the same PAN). However, note that the definition of ISD includes an office of the supplier of goods or services that receives tax invoices for input services for or on behalf of distinct persons referred to in section 25. Section 25 states that a person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.

ISDs cannot opt for composition◦
An ISD cannot take multiple registrations in a State

In summary, the key factor determining the need for ISD registration is whether the entity needs to distribute input tax credit to distinct persons (i.e., multiple GSTINs under the same PAN). The GST Council has recommended making the ISD procedure mandatory for the distribution of ITC in respect of input services procured by the Head Office (HO) from a third party but attributable to both HO and Branch Office (BO) or exclusively to one or more BOs.

To register as an ISD, you must select “Input Service Distributor” as the reason to obtain registration in the Business Details section of the new registration application on the GST Portal.

refer How to Register Input Service Distributor on GST Portal