Budget 2024 proposes compulsory ISD Registration on receipt of input services from Distinct Persons

Section 2(61) defines the Input Service Distributor.

The definition of Input Service Distributor has been amended in GST Law to make ISD registration compulsory if the office of the supplier of goods or services receives tax invoices towards receipt of input services for or on behalf of Distinct Persons.

Earlier same was optional.

Proposed Definition of Input Service Distributor

“Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25, and liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20;

Section 20 of the CGST Act deals with the Manner of distribution of credit by Input Service Distributor.

As seen in an earlier paragraph, the Definition of Input Service Distributor has been amended in GST Law.

With the amendment in the definition of ISD, the manner of distribution of credit has also been modified.

Proposed Amendment in Section 20

20(1) Any office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25, shall be required to be registered as Input Service Distributor under clause (viii) of section 24 and shall distribute the input tax credit in respect of such invoices.

(2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject to levy of tax under sub-section (3) or sub-section (4) of section 9 paid by a distinct person registered in the same State as the said Input Service Distributor, in such manner, within such time and subject to such restrictions and conditions as may be prescribed.

(3) The credit of central tax shall be distributed 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, in such manner as may be prescribed.”.