Input Service Distributor (ISD) Under GST: Meaning, Rules, and Registration

An ISD distributes eligible input tax credit relating to input services. The mechanism does not provide a route for distributing credit on goods or capital goods.

An ISD must allocate credit based on the statutory attribution and turnover rules, rather than dividing every invoice equally among branches. Section 20 of the CGST Act and Rule 39 of the CGST Rules set out how credit is distributed and reported.

Credit attributable to one recipient

If an input service is attributable to a single recipient registration, the credit must be distributed to that recipient. The ISD should retain records showing why the service relates to that unit.

Credit attributable to more than one recipient

Where a service relates to multiple recipient registrations, the credit is distributed among those recipients on a pro-rata basis using the prescribed turnover figures for the relevant period. The allocation should follow the applicable statutory formula and the recipients to whom the service is attributable.

Credit attributable to all recipients

Where the input service relates to all eligible recipients, the distribution follows the prescribed formula across the relevant recipient registrations. The ISD must also distinguish eligible and ineligible credit and distribute the different tax components in accordance with the rules.

The formula and recipient set can vary according to how the service is attributable. Do not use a flat percentage without confirming the relevant turnover period, the registrations covered, and the treatment required by the current rules.

The turnover-based formula allocates the distributable credit according to each recipient’s turnover compared with the aggregate turnover of the relevant recipients. For illustration only, assume Rs. 1,00,000 of eligible credit must be distributed among three recipients to whom the same service is attributable. If their relevant turnovers are Rs. 50 lakh, Rs. 30 lakh, and Rs. 20 lakh, their combined turnover is Rs. 100 lakh.

Using those illustrative figures, the first recipient’s share is Rs. 1,00,000 × (Rs. 50 lakh ÷ Rs. 100 lakh) = Rs. 50,000. The second recipient’s share is Rs. 30,000, and the third recipient’s share is Rs. 20,000. The calculation is only an example; apply the exact statutory formula and relevant period to the facts of your business.

The turnover figures must relate to the recipients and period specified by the rules. Confirm whether the service is attributable to one, some, or all recipients before calculating the allocation.

You can apply for ISD registration through the GST Portal using the registration application process. The GST Portal’s official registration guidance states that the application form is the same form used for several taxpayer categories, and ISD status is selected in the Business Details section.

• Go to the GST Portal and open Services > Registration > New Registration.
• Complete Part A with the required state or Union territory, legal business name, PAN, email address, and mobile number.
• Proceed to Part B and enter the business details requested by the portal.
• Under the reason for obtaining registration in the Business Details section, select “Input Service Distributor”.
• Complete the applicable authentication and submission steps, and retain the application reference details for tracking.

The portal may require additional information or authentication based on the application and risk checks. Follow the instructions displayed during registration, and check the GST Portal’s current guidance before submitting the application.

An ISD should maintain records that connect each input-service invoice with the recipients and the credit distributed. These records help explain the allocation and reconcile Form GSTR-6 with the recipient registrations.

• Supplier invoices and credit notes for the input services received.
• Details of the ISD registration and the recipient GST registrations under the same PAN.
• A working paper showing service attribution and the turnover figures used for allocation.
• The tax-wise split between eligible and ineligible credit.
• ISD invoices or credit notes issued to recipients, with the prescribed particulars.
• Return records and reconciliations for Form GSTR-6 and recipient credit entries.

Rule 39 and the GST invoice rules prescribe the distribution process and document details. Records should make the amount distributed, recipient identity, issue date, and supporting invoice traceable. Retain them in line with applicable GST record-retention requirements.

Form GSTR-6 is the return used by an Input Service Distributor to report details of input tax credit received and distributed. The ISD should report the distribution in the applicable tax period and reconcile the return with the invoices and ISD documents issued.

Under Rule 39 of the CGST Rules, credit received for distribution is to be distributed in the same month, subject to the rule’s requirements. Form GSTR-6 is due by the 13th day of the month following the tax period, unless a notification changes the due date. Check the GST Portal for current filing instructions and any notified extension.

Incorrect allocation can lead to mismatches, queries, and recovery of credit distributed in excess. Section 21 of the CGST Act provides for recovery of excess credit distributed in contravention of the ISD provisions, along with applicable interest, using the relevant recovery process.

Common causes of errors include assigning a shared invoice to the wrong recipient, using an incorrect turnover period, distributing credit to an unrelated PAN, or failing to distinguish eligible and ineligible credit. Reconcile the ISD records and recipient registrations before filing, and correct errors through the prescribed process where required.

If an invoice covers several services or the service attribution is unclear, seek professional advice before distributing the credit. Do not assume that an accounting allocation alone establishes the correct GST treatment.

A regular GST registration reports the taxpayer’s supplies and claims eligible input tax credit for that registration. An ISD has a separate function: it distributes eligible input tax credit on input services to distinct recipient registrations under the same PAN. The ISD mechanism does not replace the recipient’s own GST return and credit-eligibility checks.

Managing GST compliance involves maintaining accurate records, distributing eligible input tax credit (ITC) correctly, filing returns on time, and ensuring that business transactions are properly documented. For businesses operating across multiple branches or states, an Input Service Distributor (ISD) helps distribute eligible ITC among the relevant units in accordance with GST rules. Alongside these compliance responsibilities, you may also need funds to expand operations, purchase machinery, or manage working capital.

A Bajaj Finance Business Loan can help eligible businesses meet these funding requirements, with loan amounts ranging from Rs. 2 lakh to Rs. 80 lakh and repayment tenures of 12 to 96 months, subject to business eligibility and applicable terms. You can explore Term Loan, Flexi Dropline Loan, and Flexi Hybrid Loan options based on your business’s financial needs. 

Review the eligibility criteria, documentation requirements, and repayment obligations to determine whether the loan suits your business. A business loan is a separate financing option and does not change the rules governing ISD registration or ITC distribution. 

• Click the 'Check Loan Offer' button to open the online application form.
• Enter basic details, including Name, PAN, Date of Birth, PIN Code, and Business details, and click 'CONTINUE'.
• Complete banking verification and continue.
• View your offer details, select the loan type — Term Loan, Flexi Dropline Loan, or Flexi Hybrid Loan — and choose the repayment tenure.
• Review the details and submit the business loan application.