Concept of Input Service Distributor /[ISD] under GST

Concept of Input Service Distributor /[ISD] under GST


1. Background: The concept of Input Service Distributor under GST is being emerged from Service tax law, which provides the supplier of goods or services or both to distribute common Input Tax Credit available to his other units located in different states having separate GSTIN on same PAN, since there is no concept of centralized registration in GST.
2. Definition of ISD: As per Section 2(61) of CGST Act, 2017, "Input Service Distributor" means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office.
3. Manner of distribution of credit by Input Service Distributor:
(i) As per Section 20 of CGST Act, 2017, ISD may distribute the credit in following manner:
Credit ofIGSTCGSTSGST
Credit asIGSTCGST (If Recipient is in Same State)SGST (If Recipient is in Same State)
IGST (If Recipient is in other State)IGST (If Recipient is in other State)
(ii) ISD may distribute the credit subject to the following conditions:
(a) Credit can be distributed against a document [ISD Invoice] (Format Attached)
(b) Credit distributed shall not exceed the amount of credit available for distribution.
(c) If one to one reference of credit is available, then Credit shall be distributed only to that recipient.
(d) If credit is attributable to more than one recipient, then credit shall be distributed on PRO RATA basis of the turnover in a state of such recipient, during the relevant period, to the aggregate turnover of all such recipient.
Note: Relevant Period means Turnover of Preceding Financial Year of state.
4. Procedure for distribution of ITC by ISD [Rule 39]:
A. An ISD shall distribute ITC in the manner and subject to following conditions:
(i) The ITC available for distribution in a month shall be distributed in the same month and the details thereof shall be furnished in FORM GSTR-6.
(ii) The ISD shall, in accordance with the clause iv, separately distribute the amount of
- Ineligible ITC [Section 17(5) of CGST Act, 2017
- Eligible ITC
(iii) ITC on account of CGST, SGCT, UTGST and IGST shall be distributed separately in accordance with the provisions of clause iv.
(iv) ITC is required to be distributed to one of the recipients "R1", whether registered or not, from amongst the total of all the recipients to whom ITC is attributable, including the recipient(s) who are engaged in making exempt supply, or are otherwise not registered for any reason, shall be the amount, "C1", to be calculated by applying the following formula -
C1 = (t1/T) X C
 Where,
 "C" is the amount of credit to be distributed,
 "t1" is the turnover, of person R1 during the relevant period, and
 "T" is the aggregate of the turnover, during the relevant period, of all recipients to whom the input service is attributable.
(v) ITC on account of IGST shall be distributed as IGST to every recipient.
(vi) ITC of CGST, SGST and UTGST shall be distributed as:
- If recipient is in same state – then as CGST, SGST and UTGST respectively.
- If recipient is in other state – then as IGST.
(vii) ISD shall issue an ISD Invoice as prescribed in Rule 54(1), for distributing ITC.
(viii) ISD shall issue an ISD Credit Note as prescribed in Rule 54(1), for reduction of credit in case the ITC already distributed gets reduced for any reason.
(ix) Any additional ITC due to a Debit Note issued by supplier shall be distributed in same manner as above and in the same month in which available.
(x) Any ITC required to be reduced due to Credit Note issued by supplier shall be apportioned to each recipient in same ratio in which ITC was distributed and the amount so apportioned shall be
- Reduced from the amount to be distributed in the month in which the credit note is included in the return in FORM GSTR-6; or
- Added to the output tax liability of the recipient where the amount so apportioned is in the negative by virtue of the amount of credit under distribution being less than the amount to be adjusted.
B. If amount of ITC distributed by ISD is reduced later on for any reason for any of the recipients, including that it was distributed to a wrong recipient by the Input Service Distributor, the process for reduction of credit shall be same as above.
5. Tax Invoice for Credit Distribution:
As per Rule 54 of CGST Rules, 2017, an ISD have to issue an ISD Invoice for distribution of credit to his other units having separate GSTIN, format of which are as follows:
ISD Invoice
Recipient :Input Service Distributor
Name :GSTIN :
Address :Name :
State :Address :
State Code :State :
GSTIN :Date:
Invoice No :
Sr. No.DescriptionCredit Distributed as
IGSTCGSTSGST
1Credit of IGSTXX
2Credit of CGSTXXXX
3Credit of SGSTXXXX
TotalXXXXXX
Total Value (In figure)
Total Value (In Words)
Remarks:Signature
6. Submission of Return by an ISD:
Every ISD shall, on the basis of details contained in FORM GSTR-6A[Auto Populated], and where required, after adding, correcting or deleting the details, furnish electronically the return in FORM GSTR-6, containing the details of tax invoices on which credit has been received and those issued under section 20.
Due Date of GSTR – 6: 13th of Next Month
Format of GSTR – 6 & 6A are as below:
Form GSTR – 6A
Details of Supplies auto drafted form
(Auto drafted from GSTR – 1)
Year: 2017
Month: July
1. GSTIN
2. (a) Legal Name of the Registered Person
(b) Trade Name, if any
3. Input tax credit received for distribution
GSTIN
of
supplier
Invoice
details
RateTaxable
value
Amount of Tax
NoDateValueIntegrated
Tax
Central
Tax
State/
UT Tax
Cess
12345678910
4. Debit / Credit notes (including amendments thereof) received during current tax period
Details of original documentRevised details of document or details of Debit/Credit Note
GSTIN
of
supplier
NoDateGSTIN
of
supplier
NoDateValueRateTaxable
value
Amount of Tax
Integrated
tax
Central
Tax
State/ UT TaxCess
12345678910111213
Form GSTR – 6
Return for Input Service Distributor [ISD]
Year: 2017
Month: July
1. GSTIN
2. (a) Legal Name of the Registered Person
(b) Trade Name, if any
3. Input tax credit received for distribution
GSTIN
 of
supplier
Invoice detailsRateTaxable
value
Amount of Tax
NoDateValueIntegrated
Tax
Central
Tax
State/
UT Tax
Cess
12345678910
4. Total ITC/Eligible ITC/Ineligible ITC to be distributed for tax period
(From Table No. 3)
DescriptionIntegrated
Tax
Central
Tax
State/
UT Tax
CESS
12345
(a) Total ITC available for distribution
(b) Amount of eligible ITC
(c) Amount of ineligible ITC
5. Distribution of input tax credit reported in Table 4
GSTIN of recipient/State, if recipient is unregisteredISD
invoice
Distribution of
ITC by ISD
Central
Tax
State/
UT Tax
CESS
No.DateIntegrated Tax
1234567
5A. Distribution of the amount of eligible ITC
5B. Distribution of the amount of ineligible ITC
6. Amendments in information furnished in earlier returns in Table No. 3
Original DetailsRevised Details
GSTIN of supplierNo.DateGSTIN
of
supplier
Invoice/debit note /
credit note details
RateTaxable
 Value
Amount Of Tax
No.DateValueIntegrated TaxCentral TaxState/ UT TaxCESS
12345678910111213
6A. Information furnished in Table 3
in an earlier period was incorrect
6B. Debit Notes/Credit
Notes received [Original]
6C. Debit Notes/
Credit Notes [Amendments]
7. Input tax credit mis-matches and reclaims to be distributed in the tax period
DescriptionIntegrated
Tax
Central
Tax
State/
UT Tax
CESS
12345
7A. Input tax credit mismatch
7B. Input tax credit reclaimed on rectification of mismatch
8. Distribution of input tax credit reported in Table No. 6 and 7 (plus / minus)
GSTIN of recipientISD credit no.ISD invoiceInput tax distribution by ISD
No.DateNo.DateIntegrated TaxCentral TaxState/ UT TaxCESS
123456789
8A. Distribution of the amount of eligible ITC
8B. Distribution of the amount of ineligible ITC
9. Redistribution of ITC distributed to a wrong recipient (plus / minus)
Original input tax credit distributionRe-distribution of input tax credit to the correct recipient
GSTIN of
original recipient
ISD invoice
detail
ISD
credit note
GSTIN of
new
recipient
ISD
invoice
Input tax credit
redistributed
No.DateNo.DateNo.DateIntegrated TaxCentral TaxState/ UT TaxCESS
123456789101112
9A. Distribution of the amount of eligible ITC
9B. Distribution of the amount of ineligible ITC
10. Late Fee
On account ofCentral TaxState/ UT TaxDebit Entry No.
1234
Late Fee
11. Refund claimed from electronic cash ledger
DescriptionFeeOtherDebit Entry No.
1234
Central
Tax
State/ UT
Tax
Bank Account Details (Drop Down)
Instructions:-
(i) GSTR-6 can only be filed only after 10th of the month and before 13th of the month succeeding the tax period.
(ii) ISD details will flow to Part B of GSTR-2A of the Registered Recipients Units on filing of GSTR-6.
(iii) ISD will not have any reverse charge supplies. If ISD wants to take reverse charge supplies, then in that case ISD has to separately register as Normal taxpayer.
(iv) ISD will have late fee and any other liability only.
(v) ISD has to distribute both eligible and ineligible ITC to its Units in the same tax period in which the inward supplies have been received.
(vi) Ineligible ITC will be in respect of supplies made as per Section 17(5).
(vii) Mismatch liability between GSTR-1 and GSTR-6 will be added to ISD and further ISD taxpayer has to issue ISD credit note to reduce the ITC distributed earlier to its registered recipients units.
(viii) Table 7 in respect of mismatch liability will be populated by the system.
(ix) Refund claimed from cash ledger through Table 11 will result in a debit entry in electronic cash ledger.
7. Frequently Asked Questions:
(i) Whether CGST can be distributed as SGST and whether SGST can be distributed as CGST within the states and between the states?
Ans. No. Section 20(1) does not permit distribution of CGST as SGST and vice versa. This flows from the fundamentals of the GST law wherein the credit of CGST cannot be utilized against SGST and vice versa.
(ii) Whether Input Service Distributor is liable to furnish details of inward and outward supplies?
Ans. Input Service Distributor is not liable to furnish the details of inward and outward supplies. Input Service Distributor is liable to file return in GSTR-6 on or before 13th of the month succeeding the tax period. The details relating to input tax credit distributed is communicated to the recipient in Part B of GSTR-2A.
(iii) Is ISD required to file Annual Return?
Ans. No, ISD is not required to file Annual Return.
8. Illustrations:
A. A Ltd as an ISD has input service credit of 35 lakhs used by more than one locations, to be distributed among recipients locations X, Y and Z. The turnover of X, Y, Z in preceding financial year, is 10 crores, 15 crores and 5 crores respectively. The credit of 5 lakhs pertains to input service received only by Z. The credit attributable to X, Y, Z are as follows:
ParticularsAmount (in Rs.)
Total Credit to be distributed as ISD35 Lakhs
Credit of service used only by Z location5 Lakhs
Credit available for distribution for all units30 Lakhs
Credit distributable to X10 Lakhs
(10 crores / 30 crores * 30 Lakhs)
Credit distributable to Y15 Lakhs
(15 crores /30 crores * 30 Lakhs)
Credit distributable to Z10 Lakhs
(5 crores / 30 crores * 30 Lakhs = 5 Lakhs)
(Credit directly attributable to Z = 5 Lakhs)
B. M/s XYZ Ltd, having its head Office at Delhi, is registered as ISD. It has three units in different State namely 'Delhi', 'Jaipur' and 'Gujarat' which are operational in the current year. M/s XYZ Ltd furnishes the following information for the month of July 2018 & asks to distribute the credit to various units.
(i) CGST paid on services used only for Delhi Unit: Rs. 300000/-
(ii) IGST, CGST & SGST paid on services used for all units: Rs. 1200000/-
(iii) Total Turnover of the units for the Financial Year 2017-18 are as follows:-
UnitTurnover (Rs.)
Delhi5,00,00,000
Jaipur3,00,00,000
Gujarat2,00,00,000
Total10,00,00,000
Ans.: Computation of Input Tax Credit Distributed to various units: -
ParticularsTotal Credit AvailableDelhiJaipurGujarat
CGST paid on services used only for Delhi Unit.3,00,0003,00,000--
IGST, CGST & SGST paid on services used in all units- Distribution on pro rata basis to all the units which are operational in the current year (Refer Note1)12,00,0006,00,0003,60,0002,40,000
Total15,00,0009,00,0003,60,0002,40,000
Note 1: Credit distributed pro rata basis based on the turnover of all the units are as under: -
(a) Unit Delhi: (50000000/100000000)*1200000 = Rs. 600000/-
(b) Unit Jaipur: (30000000/100000000)*1200000 = Rs. 360000-
(c) Unit Gujarat: (20000000/100000000)*1200000 = Rs. 240000/-
Relevant period for distribution of credit:
(a) If the recipient of credit has turnover in their State in preceding financial year of the year in which credit is distributed – Such financial year.
(b) If some or all recipients do not have any turnover in their State in preceding financial year of the year in which credit is distributed – Last quarter for which details of such turnover of all the recipients are available, previous to the month during which credit is to be distributed.

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