‘Input Distributor Officer’ is one of the most crucial concepts in the Indian economy, especially for the big players in the market. With ISD, the common expenditure shared between sub-branches of an organization is centralised, which further strengthens the flow of credit under GST.
Read our blog here on Input Service Distributor and GSTR 6
Under GST, an ISD can procure invoices for the services utilized by its sub-branches, and proportionately distribute the ITC to them. This ITC distribution is captured through form GSTR 6. Following 6 points can come handy for you to distribute while distributing Input Tax Credit through GSTR 6.
An ISD can distribute the credit available against an ISD Invoice that contains the prescribed details as mentioned in Rule 54 of CGST rules, which clearly indicates the use of such invoice only for distribution of input tax credit. Similarly, for a reduction in credit, an ISD credit note containing the prescribed details as mentioned in Rule 54 of CGST rules needs to be issued.
An ISD can distribute an amount of input credit that does not exceed the amount of credit available for distribution. Furthermore, the credit of tax paid on input service attributable to a recipient shall be distributed only to that recipient. In case of more than one recipient, the credit shall be distributed pro-rata on the basis of the turnover of such recipient to the aggregate of turnover of all such recipients to whom such input service is attributable and which are operational during the year.
Input tax credit that 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 input tax credit 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) × C
“C” is the amount of credit to be distributed,
“t1” is the turnover, as referred to in section 20, 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 in accordance with the provisions of section 20;
Input tax credit on account of IGST/CGST/SGST has to be distributed separately.
Input tax credit required to be reduced on account of issuance of a credit note to ISD by the supplier shall be apportioned to each recipient in the same ratio in which the input tax credit contained in the original invoice was distributed in terms of clause (d), and the amount so apportioned shall be-
An Input Service Provider is required to file form GSTR 6, which contains the details of ITC received by an Input Service Distributor and distribution of ITC. Furthermore, under the GST regime, reconciliation has been made a mandate for a taxpayer/business who seeks to claim ITC. Although many organisation opt-in for manual reconciliation, which is both time-consuming and prone to manual errors. Thus, the very last step to a smooth ITC claim is opting for a smart and efficient reconciliation application that can scan through all your invoices and generate reconciliation report without any hassle.
IRIS Business, a leading name amongst the GST Suvidha Providers (GSP) in India, offers end-to-end solutions for all your GST filings. IRIS Sapphire, the smart GST filing application from IRIS, supports all major GST form types – GSTR 1, GSTR 3B, GSTR 6, GSTR 7, GSTR 8, GSTR 9 and ITC 04.