GST Input Service Distributor (ISD) Compliance

Section 2(61) CGST Act: an ISD is an office of the supplier that receives invoices for common input services (used by multiple GSTINs of the same legal entity) and distributes the ITC to the recipient GSTINs. Example: a corporate office in Mumbai receives a single IT software licence invoice for use by branches in Mumbai, Delhi, and Bangalore — the Mumbai entity (ISD) distributes ITC to all three GSTINs. ISD cannot distribute ITC on goods (only services) — ITC on goods must be availed at the branch where the goods are received.

Rule 39 CGST Rules: the ISD distributes ITC pro-rata based on the previous year's turnover of each recipient GSTIN. Formula: ITC to be distributed to each unit = (Turnover of the unit ÷ Aggregate turnover of all units) × Total ITC to be distributed. IGST on common services: distributed as IGST if the recipient is in a different state, or as CGST+SGST if in the same state as the ISD.

GSTR-6 is the ISD return — filed monthly by the 13th of the following month. It reports: ITC received at the ISD level, ITC distributed to each GSTIN, and any ITC reversed. GSTR-6A (auto-populated) shows ITC available at the ISD from supplier GSTR-1 filings. The distributed ITC appears in the recipients' GSTR-2B. ISD registration is separate from the regular GSTIN — requires a separate registration as ISD on the GST portal.

No — the ISD can only distribute ITC that the recipient units themselves would have been eligible to claim. If an input service falls under Section 17(5) (blocked credit), the ISD cannot distribute that ITC. Additionally, if a recipient unit uses the service partly for exempt supplies, the ISD distributes only the eligible portion (after applying Rule 42 proportionate reversal at the ISD level). The ISD is responsible for correct distribution — incorrect distribution attracts recovery from the ISD under Section 73/74.

The ISD route is optional — a company can also directly avail ITC at the head office for services used exclusively there, without distributing to branches. However, for common services used by multiple GSTINs of the same entity, the ISD route is the only legally permitted mechanism for ITC distribution across GSTINs. Directly claiming the full ITC at the branch that received the invoice (when the service is actually used by other branches) is not permitted — it amounts to ITC availing at an ineligible GSTIN.