Key differences in Input Service Distributor (ISD) provisions before and after April 1, 2025:
Here’s a table summarizing the key differences in Input Service Distributor (ISD) provisions before and after April 1, 2025:
| Feature | Before April 1, 2025 | After April 1, 2025 |
|---|---|---|
| ISD Mechanism | Optional | Mandatory for distribution of ITC on input services procured by Head Office (HO) from a third party but attributable to both HO and Branch Office (BO) or exclusively to one or more BOs. |
| Definition of ISD (Section 2(61)) | Referred to an office that receives tax invoices for input services and issues a document to distribute credit of central tax, State tax, integrated tax, or Union territory tax to suppliers with the same PAN. | Explicitly includes distribution of input tax credit for inter-state supplies on which tax is paid on a reverse charge basis. Reference to sub-sections (3) and (4) of Section 5 of the Integrated Goods and Services Tax Act is inserted. |
| Section 20 | Stated that the Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit being distributed in such manner as may be prescribed. | Amended to include invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9. |
| Rule 39 | Described the manner and conditions for distributing input tax credit, including requirements for monthly distribution, separate distribution of eligible/ineligible credit, distribution of different tax types, and the formula for calculating credit distribution. | Amended to include provision (1A) allowing a registered person with the same PAN and State code as an Input Service Distributor to issue an invoice or credit/debit note to transfer credit of common input services to the ISD. |
| Scope | Implicitly applied to input services. | Clarified to apply to the distribution of input tax credit on input services only, not on inputs or capital goods. |
| Reverse Charge Mechanism (RCM) | Not explicitly mentioned for inter-state supplies. | Explicitly includes inter-state Reverse Charge Mechanism (RCM) transactions by referencing supplies subject to tax under section 5(3) and 5(4) of the IGST Act, 2017. |
Input Service Distributor in GST : Updated Study Material 2025