Frequently Asked Questions

• What is an Input Service Distributor (ISD) under GST?
  An ISD is an office of a business that receives tax invoices for input services and distributes the eligible Input Tax Credit (ITC) to its various branches or units having the same PAN but registered separately.
• What has changed from April 1, 2025, regarding ISD registration?
  Effective April 1, 2025, ISD registration has been made mandatory for businesses that receive common input services and need to distribute the associated ITC to multiple GSTINs under the same PAN.
• Who needs to obtain mandatory ISD registration?
  Any business that: 1. Receives common input services centrally (e.g., head office, shared services center) 2. Intends to distribute ITC to different state-registered units must now register separately as an ISD under GST.
• Is ISD registration required if all services are received and used in the same GSTIN?
  No. ISD registration is not required if input services are received and utilized within the same GST registration. It is only required when credit is to be distributed across multiple GSTINs.
• What are examples of services triggering the need for ISD registration?
  1. Centralized marketing or advertising expenses billed to Head Office 2. Legal and consulting services billed at the corporate level 3. Common IT or ERP service contracts covering multiple branches 4. Shared HR, audit, compliance, or insurance services
• What is the procedure for ISD registration?
  Businesses must: 1. Apply for separate GST registration as an ISD through Form GST REG-01 2. Mention the same PAN and business legal name 3. Select “ISD” as the nature of registration
• Can an existing GST-registered entity act as both a supplier and ISD?
  No. A normal GST registration and ISD registration must be maintained separately, even if operated from the same location. A separate GSTIN is required for the ISD role.
• What is the tax treatment of credit distributed via ISD?
  ISD distributes ITC by issuing ISD invoices (not tax invoices) to recipient GSTINs, segregated by tax type: 1. CGST/SGST if in the same state 2. IGST if in a different state
• What returns must an ISD file?
  ISDs are required to file: 1. Form GSTR-6: Monthly return furnishing details of credit received and distributed 2. Form GSTR-6A: Auto-populated from GSTR-1 of suppliers (view only)
• Is late fee or penalty applicable for not obtaining ISD registration from April 2025?
  Yes. Non-compliance with the mandatory ISD registration requirement may attract: 1. Notices and scrutiny 2. Demand for wrongly availed/distributed ITC 3. Late fees and penalties under Section 122 and Section 73/74 of the CGST Act
• Can credit be distributed without ISD registration using cross-charging?
  From April 2025, cross-charging alone will not substitute ISD, especially for pure input services. ISD mechanism becomes compulsory for input service credit distribution.
• Can a business have more than one ISD registration?
  Yes. A business can have multiple ISD registrations across different locations to manage regional ITC distribution, especially in large organizations with distributed operations.
• What if the business fails to distribute ITC via ISD and instead avails credit in a unit?
  Such credit will be treated as wrongly availed and subject to reversal with interest and penalty under GST law. ISD compliance ensures transparent and compliant credit flow.
• How should businesses prepare for ISD compliance?
  1. Identify all common services availed at the corporate/head office level. 2. Segregate eligible vs. ineligible ITC. 3. Implement or enhance accounting and ERP systems to manage ISD flow. 4. Train internal teams and update SOPs for GST compliance.
• Is there a transition period to obtain ISD registration?
  Yes. Businesses that were not registered as ISD earlier but are required to be registered from April 1, 2025, are allowed a transition window to: 1. Apply for ISD registration before or on April 30, 2025, and 2. Comply with ISD invoicing and credit distribution norms prospectively from April 1, 2025.
• Will there be penalties for late ISD registration during the transition window?
  No penalty is expected if the ISD registration is obtained by April 30, 2025 and distribution starts in compliance with the amended law. After this date, non-compliance may attract: 1. Demand for reversal of wrongly claimed ITC 2. Interest under Section 50 3. Penalty under Section 122 of the CGST Act
• Are businesses allowed to migrate their existing head office registration into an ISD?
  No. ISD requires a separate GSTIN and cannot be merged with existing normal registration. Businesses must apply for a new ISD registration under the same PAN, even if from the same location.
• What should businesses do during the transition period?
  Action Steps: 1. Identify historical and ongoing common input services 2. Obtain ISD registration (via Form GST REG-01) 3. Begin credit distribution via ISD invoice from April 1, 2025 4. Ensure your ERP/accounting system is aligned to capture ISD-related entries 5. Maintain audit trails for past and future ITC distributions
• distribution of ITC on input services liable to RCM by ISD
  With effect from 01-04-2025, the law specifically provides that ISD is liable for the distribution of ITC in respect of input services liable to reverse charge.