Ch 13 - Input Service Distributor (ISD) | GST Saral by CA Dhruv Aggarwal PDF Download

 Page 1


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 13 - Input  Servi ce Di stri butor (ISD) 
 
 
 
 
 
CHAPTER 13 
 
Input Service Distributor (ISD) 
EXECUTIVE SUMMARY 
?   Input services availed in Head Office or depots or regional offices can be availed at other places 
through mechanism of 'Input Service Distributor'. 
?   They have to f ile return in form GSTR-6. 
?   Distribution of input tax credit will be on basis of turnover as per formula given in rule 4 of Input Tax 
Credit Rules. 
?   Invoice will be issued as per rule 7 of Tax Invoice Rules. 
?   If credit is reduced by credit note, such reduction will also be distributed on proportionate basis. 
13.1 Purpose of Input Service Distributor 
 
A supplier of goods and services may have head office/regional office at di fferent place/s. The services may be 
received at head office/regional office, but ultimately, these services will be indirectly used for manufacture or 
providing output service. 
Provision has been made to avail input credit of services received and paid for at head office/regional office. 
Such head office/regional office can be registered under GST as 'Input Service Distributor' and it can issue 
i nvoice on its branches/factories/depots. 
If assessee intends to use the facility, he has to register under GST. 
 
"Input Service Distributor" means an office of the supplier of goods and/or services which receives tax invoices 
issued under section 31 of CGST Act towards receipt of input services and issues a prescribed document for 
the purposes of distributing the credit of CGST (SGST in State Acts) and/or IGST paid on the said services to 
a supplier of taxable goods and/or services or both having same PAN as that of the said office - section 2(61) 
of CGST Act. 
13.2 Manner of distribution of credit by Input Service Distributor 
The Input Service Distributor may distribute the credit as per fo lowing conditions - section 20(2) of CGST 
Act. 
 
(a)   the credit can be distributed against a prescribed document issued to each of the recipients of the 
credit so distributed,  and such invoice  or other document  shall contain such details  as may be 
prescribed. 
(b)   the amount of the credit distributed shall not exceed the amount of credit available for distribution. 
(c)   the credit of tax paid on input services attributable to a recipient shall be distributed only to that 
recipient. 
(d)   the credit of tax paid on input services attributable to more than one recipient of credit shall be 
Page 2


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 13 - Input  Servi ce Di stri butor (ISD) 
 
 
 
 
 
CHAPTER 13 
 
Input Service Distributor (ISD) 
EXECUTIVE SUMMARY 
?   Input services availed in Head Office or depots or regional offices can be availed at other places 
through mechanism of 'Input Service Distributor'. 
?   They have to f ile return in form GSTR-6. 
?   Distribution of input tax credit will be on basis of turnover as per formula given in rule 4 of Input Tax 
Credit Rules. 
?   Invoice will be issued as per rule 7 of Tax Invoice Rules. 
?   If credit is reduced by credit note, such reduction will also be distributed on proportionate basis. 
13.1 Purpose of Input Service Distributor 
 
A supplier of goods and services may have head office/regional office at di fferent place/s. The services may be 
received at head office/regional office, but ultimately, these services will be indirectly used for manufacture or 
providing output service. 
Provision has been made to avail input credit of services received and paid for at head office/regional office. 
Such head office/regional office can be registered under GST as 'Input Service Distributor' and it can issue 
i nvoice on its branches/factories/depots. 
If assessee intends to use the facility, he has to register under GST. 
 
"Input Service Distributor" means an office of the supplier of goods and/or services which receives tax invoices 
issued under section 31 of CGST Act towards receipt of input services and issues a prescribed document for 
the purposes of distributing the credit of CGST (SGST in State Acts) and/or IGST paid on the said services to 
a supplier of taxable goods and/or services or both having same PAN as that of the said office - section 2(61) 
of CGST Act. 
13.2 Manner of distribution of credit by Input Service Distributor 
The Input Service Distributor may distribute the credit as per fo lowing conditions - section 20(2) of CGST 
Act. 
 
(a)   the credit can be distributed against a prescribed document issued to each of the recipients of the 
credit so distributed,  and such invoice  or other document  shall contain such details  as may be 
prescribed. 
(b)   the amount of the credit distributed shall not exceed the amount of credit available for distribution. 
(c)   the credit of tax paid on input services attributable to a recipient shall be distributed only to that 
recipient. 
(d)   the credit of tax paid on input services attributable to more than one recipient of credit shall be 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
distributed amongst such recipients to whom the input service is attributable and such distribution 
shall be pro rata  on the basis of the turnover in a State or turnover in a Union territory of such 
recipient, during the relevant period, to the aggregate of the turnover of a l such recipients to whom 
such input service  is attributable  and which are operational in the current year, during the said 
relevant period. 
(e)   the credit of tax paid on input services attributable  to a l recipients of credit shall be distributed 
amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State 
or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the 
turnover of a l recipients  and which are operational in the current year, during the said relevant 
period. 
Transitory provision for distribution of credit by Input service distributor  of service invoices received 
after GST - Input service distributor can distribute credit in respect of services received prior to GST, even if 
i nvoices of such services were received after introduction of GST - section 140(7) of CGST Act. 
13.2-1 Meaning of 'relevant period' 
 
The relevant period shall be as follows - [Explanation (a) to section 20 of CGST Act] 
 
(a)   if the recipients of the credit have turnover in their States or Union territories in the financial year 
preceding the year during which credit is to be distributed, the said financial year; or 
(b)   if some or a l recipients of the credit do not have any turnover in their States or Union territories in 
the financial year preceding the year during which the credit is to be distributed, the last quarter for 
which details of such turnover of a l the recipients are available, previous to the month during which 
credit is to be distributed. 
13.2-2 Meaning of 'recipient of credit' 
 
The  expression  "recipient  of credit" means  the  supplier  of goods  or  services  or  both having  the  same 
Permanent Account Number as that of the Input Service Distributor - Explanation (b) to section 20 of CGST 
Act. 
13.2-3 Meaning of 'turnover' 
 
"Turnover  in State" or  "Turnover  in Union  territory"  means  the  aggregate  value  of a l taxable  supplies 
(excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and 
exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or 
both and inter-State supplies of goods or services or both made from the State or Union territory by the said 
taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess - section 2(112) 
of CGST Act. 
Thus, 'turnover'  exempted supplies, inter-state supplies and exports. However, it excludes SGST, CGST, 
IGST and GST Compensation Cess. 
Turnover for the transitory period - The term 'turnover', in relation to any registered person engaged in the 
supply of taxable goods as we l as goods not taxable under this Act, means the value of turnover, reduced by 
the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and 
entry 51 and 54 of List II of the said Schedule - Explanation (c) to section 20 of CGST Act. 
Thus, 'turnover' should be excluding excise duty and State Vat. 
 
13.2-4 Manner of recovery of credit distributed in excess 
 
Where the credit distributed by the Input Service Distributor is in excess of the credit available for distribution 
by him, the excess credit so distributed shall be recovered from such distributor along with interest, and the 
Page 3


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 13 - Input  Servi ce Di stri butor (ISD) 
 
 
 
 
 
CHAPTER 13 
 
Input Service Distributor (ISD) 
EXECUTIVE SUMMARY 
?   Input services availed in Head Office or depots or regional offices can be availed at other places 
through mechanism of 'Input Service Distributor'. 
?   They have to f ile return in form GSTR-6. 
?   Distribution of input tax credit will be on basis of turnover as per formula given in rule 4 of Input Tax 
Credit Rules. 
?   Invoice will be issued as per rule 7 of Tax Invoice Rules. 
?   If credit is reduced by credit note, such reduction will also be distributed on proportionate basis. 
13.1 Purpose of Input Service Distributor 
 
A supplier of goods and services may have head office/regional office at di fferent place/s. The services may be 
received at head office/regional office, but ultimately, these services will be indirectly used for manufacture or 
providing output service. 
Provision has been made to avail input credit of services received and paid for at head office/regional office. 
Such head office/regional office can be registered under GST as 'Input Service Distributor' and it can issue 
i nvoice on its branches/factories/depots. 
If assessee intends to use the facility, he has to register under GST. 
 
"Input Service Distributor" means an office of the supplier of goods and/or services which receives tax invoices 
issued under section 31 of CGST Act towards receipt of input services and issues a prescribed document for 
the purposes of distributing the credit of CGST (SGST in State Acts) and/or IGST paid on the said services to 
a supplier of taxable goods and/or services or both having same PAN as that of the said office - section 2(61) 
of CGST Act. 
13.2 Manner of distribution of credit by Input Service Distributor 
The Input Service Distributor may distribute the credit as per fo lowing conditions - section 20(2) of CGST 
Act. 
 
(a)   the credit can be distributed against a prescribed document issued to each of the recipients of the 
credit so distributed,  and such invoice  or other document  shall contain such details  as may be 
prescribed. 
(b)   the amount of the credit distributed shall not exceed the amount of credit available for distribution. 
(c)   the credit of tax paid on input services attributable to a recipient shall be distributed only to that 
recipient. 
(d)   the credit of tax paid on input services attributable to more than one recipient of credit shall be 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
distributed amongst such recipients to whom the input service is attributable and such distribution 
shall be pro rata  on the basis of the turnover in a State or turnover in a Union territory of such 
recipient, during the relevant period, to the aggregate of the turnover of a l such recipients to whom 
such input service  is attributable  and which are operational in the current year, during the said 
relevant period. 
(e)   the credit of tax paid on input services attributable  to a l recipients of credit shall be distributed 
amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State 
or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the 
turnover of a l recipients  and which are operational in the current year, during the said relevant 
period. 
Transitory provision for distribution of credit by Input service distributor  of service invoices received 
after GST - Input service distributor can distribute credit in respect of services received prior to GST, even if 
i nvoices of such services were received after introduction of GST - section 140(7) of CGST Act. 
13.2-1 Meaning of 'relevant period' 
 
The relevant period shall be as follows - [Explanation (a) to section 20 of CGST Act] 
 
(a)   if the recipients of the credit have turnover in their States or Union territories in the financial year 
preceding the year during which credit is to be distributed, the said financial year; or 
(b)   if some or a l recipients of the credit do not have any turnover in their States or Union territories in 
the financial year preceding the year during which the credit is to be distributed, the last quarter for 
which details of such turnover of a l the recipients are available, previous to the month during which 
credit is to be distributed. 
13.2-2 Meaning of 'recipient of credit' 
 
The  expression  "recipient  of credit" means  the  supplier  of goods  or  services  or  both having  the  same 
Permanent Account Number as that of the Input Service Distributor - Explanation (b) to section 20 of CGST 
Act. 
13.2-3 Meaning of 'turnover' 
 
"Turnover  in State" or  "Turnover  in Union  territory"  means  the  aggregate  value  of a l taxable  supplies 
(excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and 
exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or 
both and inter-State supplies of goods or services or both made from the State or Union territory by the said 
taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess - section 2(112) 
of CGST Act. 
Thus, 'turnover'  exempted supplies, inter-state supplies and exports. However, it excludes SGST, CGST, 
IGST and GST Compensation Cess. 
Turnover for the transitory period - The term 'turnover', in relation to any registered person engaged in the 
supply of taxable goods as we l as goods not taxable under this Act, means the value of turnover, reduced by 
the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and 
entry 51 and 54 of List II of the said Schedule - Explanation (c) to section 20 of CGST Act. 
Thus, 'turnover' should be excluding excise duty and State Vat. 
 
13.2-4 Manner of recovery of credit distributed in excess 
 
Where the credit distributed by the Input Service Distributor is in excess of the credit available for distribution 
by him, the excess credit so distributed shall be recovered from such distributor along with interest, and the 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
provisions of sections 66 and 67 shall apply mutatis mutandis for effecting such recovery - section 21 of 
CGST Act. 
 
13.3 Tax Invoice by Input Service Distributor 
 
An ISD i nvoice or an ISD credit note issued by an Input Service Distributor shall contain the fo lowing details:- 
(a) name, address and GSTIN of the Input Service Distributor (b) a consecutive serial number containing 
alphabets or numerals or special characters hyphen or dash and slash symbolised as , "-", "/", respectively, and 
any combination thereof, unique for a financial year (c) date of its issue (d) name, address and GSTIN of the 
recipient to whom the credit is distributed  (e) amount of the credit distributed; and (f) signature or digital 
signature of the Input Service Distributor or his authorized representative - rule 7(1) of Invoice Rules. 
Invoice of ISD of banking,  FI or NBFC  - Where the Input Service Distributor is an office of a banking 
company or a financial institution or NBFC,  a tax invoice shall include any document in lieu thereof,  by 
whatever name ca led, whether or not seria ly numbered but containing the information as prescribed above - 
proviso to rule 7(1) of Invoice Rules. 
13.4 Monthly return by ISD 
 
ISD (Input Service Distributor) has to f ile monthly return by thirteenth of fo lowing month - section 39(4) of 
CGST Act. 
 
Monthly return is not required, if there is no transaction during a month - section 39(8) of CGST Act. 
Commissioner can extend date of filing return by issuing notification - section 39(6) of CGST Act. 
13.5 Procedure for distribution of input  tax credit by Input Service Distributor 
 
An Input Service  Distributor  shall distribute  input tax credit in the manner and subject to the conditions 
specified below [rule 4(1) of Input Tax Credit Rules] 
 
(a)   the input tax credit available for distribution in a month shall be distributed in the same month and the 
details thereof shall be furnished in form GSTR-6 in accordance with the provisions of Return Rules. 
(b)   the  Input  Service  Distributor  sha l,  in accordance  with the  provisions  of clause  (d),  separately 
distribute the amount in-eligible as input tax credit under the provisions of section 17(5) and the 
amount eligible as input tax credit. 
(c)   the input tax credit on account of central tax, State tax, Union territory tax and integrated tax shall be 
distributed separately in accordance with the provisions of clause (d). 
(d)   the input tax credit that is required to be distributed in accordance with the provisions of sections 
20(2)(d) and 20(2)(e) to one of the recipients 'R1', whether registered or not, from amongst the total 
of a l 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 fo lowing formula:— 
C1 = (t1÷T) × C 
where, 
" 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 of all recipients during the relevant period. 
(e)   the input tax credit on account of integrated tax shall be distributed as input tax credit of integrated 
tax to every recipient. 
(f)  the input tax credit on account of central tax and State tax shall (i) in respect of a recipient located in 
Page 4


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 13 - Input  Servi ce Di stri butor (ISD) 
 
 
 
 
 
CHAPTER 13 
 
Input Service Distributor (ISD) 
EXECUTIVE SUMMARY 
?   Input services availed in Head Office or depots or regional offices can be availed at other places 
through mechanism of 'Input Service Distributor'. 
?   They have to f ile return in form GSTR-6. 
?   Distribution of input tax credit will be on basis of turnover as per formula given in rule 4 of Input Tax 
Credit Rules. 
?   Invoice will be issued as per rule 7 of Tax Invoice Rules. 
?   If credit is reduced by credit note, such reduction will also be distributed on proportionate basis. 
13.1 Purpose of Input Service Distributor 
 
A supplier of goods and services may have head office/regional office at di fferent place/s. The services may be 
received at head office/regional office, but ultimately, these services will be indirectly used for manufacture or 
providing output service. 
Provision has been made to avail input credit of services received and paid for at head office/regional office. 
Such head office/regional office can be registered under GST as 'Input Service Distributor' and it can issue 
i nvoice on its branches/factories/depots. 
If assessee intends to use the facility, he has to register under GST. 
 
"Input Service Distributor" means an office of the supplier of goods and/or services which receives tax invoices 
issued under section 31 of CGST Act towards receipt of input services and issues a prescribed document for 
the purposes of distributing the credit of CGST (SGST in State Acts) and/or IGST paid on the said services to 
a supplier of taxable goods and/or services or both having same PAN as that of the said office - section 2(61) 
of CGST Act. 
13.2 Manner of distribution of credit by Input Service Distributor 
The Input Service Distributor may distribute the credit as per fo lowing conditions - section 20(2) of CGST 
Act. 
 
(a)   the credit can be distributed against a prescribed document issued to each of the recipients of the 
credit so distributed,  and such invoice  or other document  shall contain such details  as may be 
prescribed. 
(b)   the amount of the credit distributed shall not exceed the amount of credit available for distribution. 
(c)   the credit of tax paid on input services attributable to a recipient shall be distributed only to that 
recipient. 
(d)   the credit of tax paid on input services attributable to more than one recipient of credit shall be 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
distributed amongst such recipients to whom the input service is attributable and such distribution 
shall be pro rata  on the basis of the turnover in a State or turnover in a Union territory of such 
recipient, during the relevant period, to the aggregate of the turnover of a l such recipients to whom 
such input service  is attributable  and which are operational in the current year, during the said 
relevant period. 
(e)   the credit of tax paid on input services attributable  to a l recipients of credit shall be distributed 
amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State 
or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the 
turnover of a l recipients  and which are operational in the current year, during the said relevant 
period. 
Transitory provision for distribution of credit by Input service distributor  of service invoices received 
after GST - Input service distributor can distribute credit in respect of services received prior to GST, even if 
i nvoices of such services were received after introduction of GST - section 140(7) of CGST Act. 
13.2-1 Meaning of 'relevant period' 
 
The relevant period shall be as follows - [Explanation (a) to section 20 of CGST Act] 
 
(a)   if the recipients of the credit have turnover in their States or Union territories in the financial year 
preceding the year during which credit is to be distributed, the said financial year; or 
(b)   if some or a l recipients of the credit do not have any turnover in their States or Union territories in 
the financial year preceding the year during which the credit is to be distributed, the last quarter for 
which details of such turnover of a l the recipients are available, previous to the month during which 
credit is to be distributed. 
13.2-2 Meaning of 'recipient of credit' 
 
The  expression  "recipient  of credit" means  the  supplier  of goods  or  services  or  both having  the  same 
Permanent Account Number as that of the Input Service Distributor - Explanation (b) to section 20 of CGST 
Act. 
13.2-3 Meaning of 'turnover' 
 
"Turnover  in State" or  "Turnover  in Union  territory"  means  the  aggregate  value  of a l taxable  supplies 
(excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and 
exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or 
both and inter-State supplies of goods or services or both made from the State or Union territory by the said 
taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess - section 2(112) 
of CGST Act. 
Thus, 'turnover'  exempted supplies, inter-state supplies and exports. However, it excludes SGST, CGST, 
IGST and GST Compensation Cess. 
Turnover for the transitory period - The term 'turnover', in relation to any registered person engaged in the 
supply of taxable goods as we l as goods not taxable under this Act, means the value of turnover, reduced by 
the amount of any duty or tax levied under entry 84 of List I of the Seventh Schedule to the Constitution and 
entry 51 and 54 of List II of the said Schedule - Explanation (c) to section 20 of CGST Act. 
Thus, 'turnover' should be excluding excise duty and State Vat. 
 
13.2-4 Manner of recovery of credit distributed in excess 
 
Where the credit distributed by the Input Service Distributor is in excess of the credit available for distribution 
by him, the excess credit so distributed shall be recovered from such distributor along with interest, and the 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
provisions of sections 66 and 67 shall apply mutatis mutandis for effecting such recovery - section 21 of 
CGST Act. 
 
13.3 Tax Invoice by Input Service Distributor 
 
An ISD i nvoice or an ISD credit note issued by an Input Service Distributor shall contain the fo lowing details:- 
(a) name, address and GSTIN of the Input Service Distributor (b) a consecutive serial number containing 
alphabets or numerals or special characters hyphen or dash and slash symbolised as , "-", "/", respectively, and 
any combination thereof, unique for a financial year (c) date of its issue (d) name, address and GSTIN of the 
recipient to whom the credit is distributed  (e) amount of the credit distributed; and (f) signature or digital 
signature of the Input Service Distributor or his authorized representative - rule 7(1) of Invoice Rules. 
Invoice of ISD of banking,  FI or NBFC  - Where the Input Service Distributor is an office of a banking 
company or a financial institution or NBFC,  a tax invoice shall include any document in lieu thereof,  by 
whatever name ca led, whether or not seria ly numbered but containing the information as prescribed above - 
proviso to rule 7(1) of Invoice Rules. 
13.4 Monthly return by ISD 
 
ISD (Input Service Distributor) has to f ile monthly return by thirteenth of fo lowing month - section 39(4) of 
CGST Act. 
 
Monthly return is not required, if there is no transaction during a month - section 39(8) of CGST Act. 
Commissioner can extend date of filing return by issuing notification - section 39(6) of CGST Act. 
13.5 Procedure for distribution of input  tax credit by Input Service Distributor 
 
An Input Service  Distributor  shall distribute  input tax credit in the manner and subject to the conditions 
specified below [rule 4(1) of Input Tax Credit Rules] 
 
(a)   the input tax credit available for distribution in a month shall be distributed in the same month and the 
details thereof shall be furnished in form GSTR-6 in accordance with the provisions of Return Rules. 
(b)   the  Input  Service  Distributor  sha l,  in accordance  with the  provisions  of clause  (d),  separately 
distribute the amount in-eligible as input tax credit under the provisions of section 17(5) and the 
amount eligible as input tax credit. 
(c)   the input tax credit on account of central tax, State tax, Union territory tax and integrated tax shall be 
distributed separately in accordance with the provisions of clause (d). 
(d)   the input tax credit that is required to be distributed in accordance with the provisions of sections 
20(2)(d) and 20(2)(e) to one of the recipients 'R1', whether registered or not, from amongst the total 
of a l 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 fo lowing formula:— 
C1 = (t1÷T) × C 
where, 
" 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 of all recipients during the relevant period. 
(e)   the input tax credit on account of integrated tax shall be distributed as input tax credit of integrated 
tax to every recipient. 
(f)  the input tax credit on account of central tax and State tax shall (i) in respect of a recipient located in 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
the same State in which the Input Service Distributor is located, be distributed as input tax credit of 
central tax and State tax respectively ( i) in respect of a recipient located in a State other than that of 
the Input Service Distributor, be distributed as integrated tax and the amount to be so distributed 
shall be equal to the aggregate of the amount of input tax credit of central tax and State tax that 
qualifies for distribution to such recipient in accordance with clause (d). 
(g)   The Input Service Distributor shall issue an ISD i nvoice, as prescribed  in Invoice Rules, clearly 
indicating in such invoice that it is issued only for distribution of input tax credit. 
(h)   The Input Service Distributor shall issue an ISD credit note, as prescribed  in Invoice Rules, for 
reduction of credit in case the input tax credit already distributed gets reduced for any reason. 
(i)   Any additional amount of input tax credit on account of issuance of a debit note to an Input Service 
Distributor by the supplier shall be distributed in the manner and subject to the conditions specified in 
clauses (a) to (g) and the amount attributable  to any recipient shall be calculated  in the manner 
provided in clause (d) above and such credit shall be distributed in the month in which the debit note 
has been included in the return in form GSTR-6. 
(j)   Any input tax credit required to be reduced on account of issuance of a credit note to the Input 
Service Distributor by the supplier shall be apportioned to each recipient in the same ratio in which 
input tax credit contained in the original i nvoice was distributed in terms of clause (d) above, and the 
amount so apportioned shall be,- (i) reduced from the amount to be distributed in the month in which 
the credit note is included in the return in form GSTR-6 and ( i) added to the output tax liability of the 
recipient and where the amount so apportioned is in the negative by virtue of the amount of credit to 
be distributed is less than the amount to be adjusted. 
Adjustment if less or more credit was distributed - If the amount of input tax credit distributed by an Input 
Service Distributor is reduced later on for any other reason for any of the recipients, including that it was 
distributed to a wrong recipient by the Input Service Distributor, the process prescribed in rule 4(1)(j) sha l, 
mutatis mutandis apply for reduction of credit - rule 4(2) of Input Tax Credit Rules. 
Distribution  of credit on basis of credit note - Subject to rule 4(2), the Input Service Distributor sha l, on 
the basis of the ISD credit note specified in rule 4(1)(h), issue an ISD Invoice to the recipient entitled to such 
credit and include the ISD credit note and the ISD Invoice in the return in form GSTR-6 for the month in 
which such credit note and i nvoice was issued - rule 4(3) of Input Tax Credit Rules.