Whether IGST can be distributed as CGST from 01.04.2025 by Input Service Distributor
whether IGST can be distributed as CGST from April 1, 2025:
- Amendment in CGST Act 2017: Section 20 was substituted by the Finance Act, 2024, with effect from April 1, 2025.
- Section 20(3): Section 20(3) of the CGST Act now states: “The credit of central tax shall be distributed 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, in such manner as may be prescribed”.
- Implication: From April 1, 2025, the amended Section 20(3) explicitly allows IGST credit to be distributed as CGST credit and vice versa.
- Rule 39(1)(i): Previously, Rule 39(1)(i) mandated that “the input tax credit on account of integrated tax shall be distributed as input tax credit of integrated tax to every recipient”.
- Contradiction Resolution: The amendment to Section 20 provides the needed clarity by aligning the Act with the flexibility intended in the distribution of input tax credit.
- Incorrect Distribution: Distributing credit in contravention of the provisions contained in section 20 may lead to recovery of the excess credit. Credit eligibility at the hands of the recipient may be disallowed by the department in case of incorrect taxes are distributed.
In summary, from April 1, 2025, IGST credit can be distributed as CGST credit, as per the amended Section 20(3) of the CGST Act.
Refer Input Service Distributor in GST : Updated Study Material 2025