Rule 39 of CGST Rules -Procedure for distribution of input tax credit by Input Service Distributor

(updated as on 15.11.2017)

(1) AnInput Service Distributor shall distribute input tax credit in the manner and subject to the
following conditions, namely,-

(a) the input tax credit available for distribution in a month shall be distributed inthe same month and the details thereof shall be furnished in FORM GSTR-6 in accordance with the provisions of Chapter VIII of these rules;

(b) the Input Service Distributor shall, in accordance with the provisions ofclause (d), separately distribute the amount of ineligible input tax credit(ineligible under the provisions of sub-section (5) of section 17 or otherwise)and the amount of eligible input tax credit;

(c) the input tax credit on account of central tax, State tax, Union territory taxand integrated tax shall be distributed separately in accordance with theprovisions of clause (d);

(d) the input tax credit that is required to be distributed in accordance with theprovisions of clause (d) and (e) of sub-section (2) of section 20 to one of therecipients R1, whether registered or not, from amongst the total of all therecipients to whom input tax credit is attributable, including the recipient(s)who are engaged in making exempt supply, or are otherwise not registered forany reason, shall be the amount, C1, to be calculated by applying thefollowing formula –

C1 = (t1T) 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 relevantperiod, and
T is the aggregate of the turnover, during the relevant period, of all recipientsto whom the input service is attributable in accordance with the provisions ofsection 20;

(e) the input tax credit on account of integrated tax shall be distributed as input taxcredit of integrated tax to every recipient;

(f) the input tax credit on account of central tax and State tax or Union territory taxshall-

(i) in respect of a recipient located in the same State or Union territory in whichthe Input Service Distributor is located, be distributed as input tax credit ofcentral tax and State tax or Union territory tax respectively;

(ii) in respect of a recipient located in a State or Union territory other than thatof the Input Service Distributor, be distributed as integrated tax and the amountto be so distributed shall be equal to the aggregate of the amount of input taxcredit of central tax and State tax or Union territory tax that qualifies fordistribution to such recipient in accordance with clause (d);

(g) the Input Service Distributor shall issue an Input Service Distributor invoice, asprescribed in sub-rule (1) of rule 54, clearly indicating in such invoice that it is issuedonly for distribution of input tax credit;

(h) the Input Service Distributor shall issue an Input Service Distributor credit note, asprescribed in sub-rule (1) of rule 54, for reduction of credit in case the input tax creditalready distributed gets reduced for any reason;

(i) any additional amount of input tax credit on account of issuance of a debit note toan Input Service Distributor by the supplier shall be distributed in the manner andsubject to the conditions specified in clauses (a) to (f) and the amount attributable toany recipient shall be calculated in the manner provided in clause (d) and such creditshall be distributed in the month in which the debit note is included in the return inFORM GSTR-6;

(j) any input tax credit required to be reduced on account of issuance of a credit note tothe Input Service Distributor by the supplier shall be apportioned to each recipient inthe same ratio in which the input tax credit contained in the original invoice wasdistributed in terms of clause (d), and the amount so apportioned shall be-

(i) reduced from the amount to be distributed in the month in which the creditnote is included in the return in FORM GSTR-6; or

(ii) added to the output tax liability of the recipient where the amount soapportioned is in the negative by virtue of the amount of credit under distributionbeing less than the amount to be adjusted.

(2) If the amount of input tax credit distributed by an Input Service Distributor is reducedlater on for any other reason for any of the recipients, including that it was distributed to awrong recipient by the Input Service Distributor, the process specified in clause (j) of sub rule(1) shall apply, mutatis mutandis, for reduction of credit.
(3) Subject to sub-rule (2), the Input Service Distributor shall, on the basis of the InputService Distributor credit note specified in clause (h) of sub-rule (1), issue an Input ServiceDistributor invoice to the recipient entitled to such credit and include the Input ServiceDistributor credit note and the Input Service Distributor invoice in the return in FORMGSTR-6 for the month in which such credit note and invoice was issued.

CHAPTER V

INPUT TAX CREDIT

Rule 36 :Documentary requirements and conditions for claiming input tax credit
Rule 37 : Reversal of input tax credit in the case of non-payment of consideration
Rule 38 :Claim of credit by a banking company or a financial institution
Rule 39 :Procedure for distribution of input tax credit by Input Service Distributor
Rule 40 :Manner of claiming credit in special circumstances
Rule 41 :Transfer of credit on sale, merger, amalgamation, lease or transfer of abusiness
Rule 42 :Manner of determination of input tax credit in respect of inputs or input servicesand reversal thereof
Rule 43 :Manner of determination of input tax credit in respect of capital goods and reversal thereof in certain cases
Rule 44 :Manner of reversal of credit under special circumstances
Rule 44A : Manner of reversal of credit of Additional duty of Customs in respect of Golddore bar
Rule 45 :Conditions and restrictions in respect of inputs and capital goods sent to the jobworker