Section 20 - Conditions & Manner for distribution of ITC by Input Service Distributor

Contents

Para

Topics

Section/Rules/N/C/O

20.0

Meaning and purpose of Input Service Distributor

NA

20.1

Manner and Conditions for distribution of ITC by ISD

NA

20.1.1

Conditions for distribution of ITC by ISD to its recipient of credit

Section 20(1)

20.1.2

Calculation of amount of distributable ITC by ISD to each recipient of credit

NA

20.1.2.1

Basis for distribution of ITC to each recipient of credit

Section 20(2)(c), (d) & (e)

20.1.2.2

Formula for calculation of amount of distributable ITC to each recipient of credit

Rule 39(1)(d)

20.1.2.3

Meaning of Relevant Period, Recipient of Credit & Turnover for section 20

Explanation to section 20

20.1.2.4

Eligible & Ineligible ITC should be distributed separately

Rule 39(1)(b)

20.1.2.5

Formula as per clause (d) shall be applied separately for each tax

Rule 39(1)(c)

20.2

Other Conditions & Manner for distribution of ITC by ISD

NA

20.2.1

ITC distributed shall not exceed ITC available for distribution

Section 20(2)(b)

20.2.2

ITC shall be distributed in same month and should be furnished in GSTR-6

Rule 39(1)(a)

20.2.3

Eligible & Ineligible ITC shall be separately distributed

Rule 39(1)(b)

20.2.4

Manner of distribution of each type of tax to recipient

Rule 39(1)(e) & (f)

20.3

Documents & its Contents required for distribution of ITC by ISD

NA

20.3.1

Prescribed documents against which ITC can be distributed

Section 20(2)(a)

20.3.1.1

ISD invoice to be issued for distribution of ITC

Rule 39(1)(g)

20.3.1.2

ISD CN to be issued  for reduction in already distributed ITC

Rule 39(1)(h)

20.3.2

Contents of ISD invoice or ISD CN

Rule 54(1)

20.3.3

Contents of Invoice/CN issued by one ISD to another ISD

Rule 54(1A)

20.4

Increase /decrease in amount of ITC of ISD by its supplier through CN/DN

NA

20.4.1

Distribution of Additional ITC through DN issued to an ISD by its supplier

Rule 39(1)(i)

20.4.2

Apportionment of reduction in ITC through CN issued to an ISD by its supplier

Rule 39(1)(j)

20.4.3

Reduction in ITC later on for any other reason

Rule 39(2) & (3)

20.5

Miscellaneous Questions

NA

 

20.0 Meaning and purpose of Input Service Distributor

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Concept of ISD is a facility made available to business having a large share of common expenditure and where billing/payment is done from a centralized location.

Refer Section 2(61) for meaning of “Input Service Distributor”

Ex

The Corporate office of ABC Ltd. is at Bangalore, with its business locations of selling and servicing of goods at Bangalore, Chennai, Mumbai and Kolkata. Software license and maintenance is used at all the locations, but invoice for these services (indicating CGST and SGST) are received at Corporate Office. Since the software is used at all the four locations, the ITC of entire services cannot be claimed at Bangalore. The same has to be distributed to all the four locations. For that reason, the Bangalore Corporate office has to act as ISD to distribute the credit. If the corporate office of ABC Ltd, an ISD situated in Bangalore, receives invoices indicating Rs.4 lakh of CGST, Rs.4 lakh of SGST and Rs.7 lakh of IGST, it can distribute the ITC of CGST, SGST as well as IGST of Rs.15 lakh amongst its locations at Bangalore, Chennai, Mumbai and Kolkata through an ISD invoice containing the amount of credit distributed.

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[FAQ-1] [FAQ-22/12/18 Q-31]

Will ISD be required to be separately registered other than the existing tax payer registration?

Yes, ISD is required to obtain a separate registration even though it may be separately registered. The threshold limit of registration is not applicable to ISD.

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[FAQ-2] [FAQ-22/12/18 Q-32]

Can a tax payer have multiple ISDs?

Yes, different offices of a company like marketing division, security division etc. may apply for separate ISD registration.

 

20.1 Manner and Conditions for distribution of ITC by ISD

 

20.1.1 Conditions for distribution of ITC by ISD to its recipient of credit

Section 20(1)

ISD shall distribute ITC of

CGST as CGST or

IGST as IGST or CGST,

by issue of a document containing amount of ITC being distributed in such manner as prescribed in Rule 39.

 

20.1.2 Calculation of amount of distributable ITC by ISD to each recipient of credit

 

20.1.2.1 Basis for distribution of ITC to each recipient of credit

Section 20(2)(c), (d) & (e)

ISD may distribute ITC to the recipient as follows

Clause

If ITC on input services attributable to

ITC shall be distributed

(c)

a recipient of credit

only to that recipient

(d)

more than one recipient of credit

amongst such recipients to whom ITC is attributable on pro rata basis as prescribed in rule 39(1)(d)

(e)

all recipients of credit

amongst all such recipients to whom ITC is attributable on pro rata basis as prescribed in rule 39(1)(d)

.

Question & Answer

 

20.1.2.2 Formula for calculation of amount of distributable ITC to each recipient of credit

Rule 39(1)(d)

ITC distributable as per section 20(2)(d) and (e)

to one of the recipients ‘R1’, whether registered or not, from amongst the total of all the recipients to whom ITC is attributable, including recipient(s) engaged in exempt supply 

shall be C1 = (t1÷T) ×C

where,

C1 = ITC distributable to each recipient

C = ITC to be distributed,

t1 = Turnover in a state/UT of R1 during relevant period, and

T = Aggregate of turnover of all recipients to whom ITC is attributable and which are operational in the current year, during relevant period.

Question & Answer

 

20.1.2.3 Meaning of Relevant Period, Recipient of Credit & Turnover for section 20

Explanation to section 20 for the purposes of this section,

“Relevant Period”

Conditions for relevant period

Relevant Period

(i) if recipients of credit have turnover in their States/ UT in previous FY

Previous FY

(ii) if some or all recipients of the credit do not have any turnover in their States/ UT in previous FY,

last quarter for which details of turnover of all recipients are available, previous to the month during which ITC is to be distributed

 

(b) “recipient of credit” means supplier of goods or services or both having same PAN as that of the ISD;

(c) ‘‘turnover’’, in relation to any RP engaged in the supply of taxable goods as well as goods not taxable under this Act, means turnover excludes Central Excise Duty, State Excise Duty, Central sales tax and VAT.

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ITC of input services is distributed only amongst those recipients to whom the input services are attributable.

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ITC is distributed amongst the operational units only.

 

20.1.2.4 Formula as per clause (d) shall be applied separately for each tax

Rule 39(1)(c)

TC of CGST, SGST, UGST & IGST shall be distributed separately as per clause (d)

 

20.2 Other Conditions & Manner for distribution of ITC by ISD

 

20.2.1 ITC distributed shall not exceed ITC available for distribution

Section 20(2)(b)

ITC distributed shall not exceed ITC available for distribution

 

20.2.2 ITC shall be distributed in same month and should be furnished in GSTR-6

Rule 39(1)(a)

ITC available for distribution in a month shall be distributed in the same month and the details thereof shall be furnished in GSTR-6

 

20.2.3 Eligible & Ineligible ITC shall be separately distributed

Rule 39(1)(b)

ISD shall, as per clause (d), separately distribute the amount of

ineligible ITC (ineligible u/s 17(5) or otherwise) and

eligible ITC;

 

20.2.4 Manner of distribution of each type of tax to recipient

Rule 39(1)(e) & (f)

ITC on each tax shall be distributed as follows:

Clause

Distribution of ITC of

Location of Recipient & ISD

shall be distributed to recipient as

(e)

IGST

NA

ITC of IGST

(f)

CGST, SGST, UGST

(i) in same State or UT

ITC of CGST and SGST or UGST respectively

(f)

CGST, SGST, UGST

(ii) in different State or UT

ITC of IGST

.

Question & Answer

 

20.3 Documents & its Contents required for distribution of ITC by ISD

 

20.3.1 Prescribed documents against which ITC can be distributed

Section 20(2)(a)

ITC can be distributed to recipients against a document containing details as prescribed

 

20.3.1.1 ISD invoice to be issued for distribution of ITC

Rule 39(1)(g)

ISD shall issue an ISD invoice as per Rule 54(1) clearly indicating in such invoice that it is issued only for distribution of ITC;

 

20.3.1.2 ISD CN to be issued for reduction of ITC already distributed

Rule 39(1)(h)

ISD shall issue an ISD CN as per Rule 54(1) for reduction of credit in case the ITC already distributed gets reduced for any reasons

 

20.3.2 Contents of Invoice issued by ISD

Rule 54(1)

Refer para 31.14.1 of guide on section 31

 

20.3.3 Contents of Invoice/CN issued by one ISD to another ISD

Rule 54(1)

Refer para 31.14.2 of guide on section 31

 

20.4 Increase /decrease in amount of ITC of ISD by its supplier through CN/DN

 

20.4.1 Distribution of Additional ITC through DN issued to an ISD by its supplier

Rule 39(1)(i)

any additional ITC through DN issued to an ISD by its supplier

shall be distributed as per conditions specified in clauses (a) to (f) and

amount attributable to any recipient shall be calculated as per clause (d) and

such credit shall be distributed in the month in which DN is included in GSTR-6;

 

20.4.2 Apportionment of reduction in ITC through CN issued to an ISD by its supplier

Rule 39(1)(j)

any reduction in ITC through CN issued to an ISD by its supplier

shall be apportioned to each recipient in the same ratio in which the original credit was distributed and the amount so apportioned shall be-

(i) reduced from ITC to be distributed in the month in which CN is included in GSTR-6; or

(ii) added to the output tax liability of the recipient where the amount so apportioned is in excess of ITC to be distributed by ISD

 

20.4.3 Reduction in ITC later on for any other reason

Rule 39(2)

If ITC distributed by an ISD is reduced later on for any other reason for any of the recipients, including that it was distributed to a wrong recipient by the ISD,

process specified in Rule 39(1)(j) shall apply, mutatis mutandis, for reduction of credit.

Rule 39(3)

Subject to Rule 39(2), ISD shall, on the basis of ISD CN specified in clause 39(1)(h),

issue an ISD invoice to the recipient entitled to such credit and include ISD CN and ISD invoice in the return in GSTR-6 for the month in which such CN and invoice was issued.

 

20.5 Miscellaneous Questions

Question & Answer

GST Gyaan | https://gstgyaan.in | Rajesh Ritolia - 9350171263

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