FAQs on Input Service Distributor (ISD) and CGST Act from 01.04.2025 :
What is an Input Service Distributor (ISD) under CGST?
An Input Service Distributor (ISD) is defined as an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services for or on behalf of distinct persons (as defined in Section 25 of the CGST Act) and is liable to distribute the input tax credit (ITC) in respect of such invoices in the manner provided in Section 20 of the CGST Act. This definition is detailed in Section 2(61) of the CGST Act.
What is the purpose of the amendments in the CGST Act, specifically regarding Input Service Distributors (ISDs), effective from April 1, 2025?
The amendments to Section 2(61) and Section 20 of the CGST Act, effective from April 1, 2025, explicitly provide for the distribution of input tax credit (ITC) by an ISD in respect of inter-state supplies on which tax is paid on a reverse charge basis. This is achieved by inserting references to sub-section (3) and sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017 in these sections. This clarifies and expands the scope of ISD to include inter-state reverse charge mechanism (RCM) transactions.
What is Section 39(4) of the CGST Act, 2017?
Section 39(4) of the CGST Act, 2017 mandates that every taxable person registered as an Input Service Distributor must furnish a return electronically for every calendar month or part thereof, in the prescribed form and manner, within thirteen days after the end of such month.
What is the procedure for distribution of Input Tax Credit (ITC) by an Input Service Distributor (ISD) as per Rule 39 of the CGST Rules?
Rule 39 outlines a detailed procedure for distributing ITC. Key conditions include:
The ITC available for distribution in a month must be distributed in the same month, and details must be furnished in FORM GSTR-6.
The amount of credit distributed cannot exceed the available credit.
Credit for input services attributable to a recipient can only be distributed to that recipient.
Credit for services attributable to multiple recipients must be distributed pro rata based on the turnover of each recipient during the “relevant period” (as defined in the rules).
ISDs must separately distribute eligible and ineligible ITC.
The distribution of central tax, state tax, union territory tax, and integrated tax must be done separately.
The ISD must issue an Input Service Distributor invoice clearly indicating that it is solely for the distribution of input tax credit.
What information is required on an Input Service Distributor (ISD) invoice?
According to Rule 54(1) of the CGST Rules, an ISD invoice or credit note must include:
Name, address, and GSTIN of the ISD
A consecutive serial number (up to 16 characters) unique for the financial year
Date of issue
Name, address, and GSTIN of the recipient of the distributed credit
The amount of credit distributed
Signature or digital signature of the ISD or authorized representative.
What is Form GSTR-6 and what details does it contain?
Form GSTR-6 is the return required to be filed by an Input Service Distributor (ISD). Based on its format, it includes details such as:
GSTIN and legal name of the registered person (ISD).
Details of input tax credit received for distribution including GSTIN of supplier, invoice details (number, date, value), and amount of tax (Integrated Tax, Central Tax, State/UT Tax, CESS).
Total ITC/Eligible ITC/Ineligible ITC to be distributed for the tax period.
Distribution of input tax credit reported in Table 4 to recipients, including GSTIN of recipient/State, ISD invoice details, and distribution of tax by ISD (Integrated Tax, Central Tax, State/UT Tax, CESS).
Amendments in information furnished in earlier returns.
Input tax credit mismatches and reclaims to be distributed in the tax period.
Redistribution of ITC distributed to a wrong recipient (plus/minus).
Late Fee details, if any.
Refund claimed from electronic cash ledger.
What are the consequences of failing to file GSTR-6 by the due date?
As per Section 47 of the CGST Act, failing to furnish returns required under Section 39, including GSTR-6, by the due date will result in a late fee of one hundred rupees for every day the failure continues, subject to a maximum of five thousand rupees.
Waiver of Late Fee: The government can waive the amount of late fee payable by any registered person who fails to furnish the return in FORM GSTR-6 by the due date. Any waiver is capped at ₹25 for every day the failure continues (similar provision is there under SGST ACt.
Can an extension to the GSTR-6 filing deadline be expected?
The Commissioner has the power to extend the time limit for furnishing the GSTR-6 return under Section 39(6) read with Section 168 of the CGST Act. There have been instances of deadline extensions in the past. For example, Notification No. 3/2025 extended the deadline for December 2024.
Refer Input Service Distributor in GST : Updated Study Material 2025