Input Service Distributor
Likewise, Input Service Distributor(ISD) existed in pre-GST era, it will also exist in GST era but with a difference in its entirety.
It is defined under Section 2(61) of CGST Act, 2017 as below:
Section 2(61) “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;
Due to its structure and existence leading to many anomalies, the concept of ISD will see heat in various High Courts. The reason is half empowered existence in as much as it has one essential pillar missing.
Its irony that the availment of ITC is restrictive and silent for an ISD but distribution of ITC by an ISD has no barrier as provided in the GST law.
As per Section 20 of CGST Act,2017, the distribution of ISD is as below:
20. (1) The Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit being distributed in such manner as may be prescribed.
(2) The Input Service Distributor may distribute the credit subject to the following conditions, namely:––
(a) the credit can be distributed to the recipients of credit against a document containing 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 of credit 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 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 all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period;Taking input tax credit in respect of inputs and capital goods sent for job work.
(e) the credit of tax paid on input services attributable to all 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 all recipients and which are operational in the current year, during the said relevant period.
But, there is no provision which empowers to avail ITC of every other state where it does not exist but at the same it can transfer ITC in every State. It is pertinent to note that the distribution of ITC comes after availment only. This is resulting taxpayer to go for various ISD registrations. It must be known that the settled trite law is that half way effect cannot be given to any provision in law.
The concept of ISD needs to be completed with first pillar of availment of ITC with broad manner at par its distribution to result and effect its true meaning.