FAQ ON CHAPTER 11 RELATING TO INPUT SERVICE DISTRIBUTOR

GST Update 27.10.2016

GST DAILY DOSE OF UPDATION:-

FAQ ON CHAPTER 11 RELATING TO INPUT SERVICE DISTRIBUTOR:- This update covers clarifications issued in FAQs relating to input service distributor.

Question no. 1:-This clarifies the meaning of ISD. ISD means an office of supplier of goods/services which receives tax invoices towards receipt of input services and issues tax invoice or such other document as prescribed for distributing the credit of CGST/SGST/IGST paid on said services to supplier of taxable goods/services having same PAN as that of the office referred to above. For the purpose of distributing credit, ISD is deemed as supplier of services.

Question no. 2:- An ISD is required to obtain registration as a deemed supplier of services. The threshold limit of registration is not applicable to ISD. The registration of ISD under the existing regime would not be migrated in GST regime. All the existing ISDs will be required to obtain fresh registrations under new regime in case they want to operate as an ISD.

Question no. 3:-This speaks about the conditions for distribution of credit as follows:-
1.     Credit should be distributed through tax invoice or other document as prescribed;
2.     Amount of credit distributed should not exceed the amount of credit available;
3.     Credit should be distributed only to such suppliers to whom such services are attributable;
4.     Credit in respect of services attributable to more than one supplier should be distributed proportionately on the basis of turnover of respective supplier during the preceding financial year.
The conditions for credit distribution by ISD are similar to the provisions presently in force.

Question no. 4:-This states that ISD is required to file monthly return by 13^th of the following month in Form GSTR-6. At present, ISD is required to file half yearly return as normal service tax assessees whereas under GST, there will be separate return to be filed monthly. This will definitely increase the compliance cost of ISD.

Question no. 5:-This clarifies that different offices like marketing division, security division etc. may apply for separate ISD. However, obtaining separate ISD registration will lead to filing of separate monthly returns for each registration thereby increasing compliance.

Question no. 6:-This clarifies that appropriate provisions have been incorporated in the Model GST Law for recovery of excess/wrongly distributed credit by ISD. The recovery can be made initiating action against ISD or against the recipient of credit. The government has ensured adequate safeguards against wrong distribution of credit by ISD as recovery can be made from ISD or recipient of credit.

Question no. 8:-The role of ISD in distributing credit to units located in different States is very significant in GST regime. ISD can distribute SGST credit as IGST for units located in different States. This is for the reason that SGST credit is State specific and may not be useful for units located in different State.

We will carry some other questions in our next update.

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GST Update 27.10.2016

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