Distribution of Credit by Input Service Distributor (ISD) In GST – Section 20

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  • By Taxmann
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  • Last Updated on 30 December, 2020

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As per sub-section (1) of Section 20, the Input Service Distributor shall distribute the credit of:

a) Central Tax:

 
As Central Tax or Integrated Tax and
 

b) Integrate 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

Distribution of ISD under GST:

 As per sub-rule (1) of Rule 39, there will be two situations:

A. ISD & recipient of credit is in same state:

 

When the ISD and the recipient of credit are in the same state then the Input tax credit shall be distributed as Central tax and State tax or Union territory tax respectively.

B. ISD and Recipient of credit are in different state:

 
When ISD and the recipient of credit are in a different state then the input tax credit shall be distributed as IGST 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 or Union Territory Tax that qualifies for distribution to such recipient in accordance with clause (d).
 

Credit Distribution

IGST

CGST

SGST

As

IGST

CGST (Same state)

SGST (Same state)

IGST (Separate state)

IGST(Separate state)

Distribution Formula:

As per clauses (d) and (e) of sub-section (2) of Section 20 of CGST Act, ITC is required to be distributed to one of the recipients ‘R1’, whether registered or not, from amongst the total of all 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 following 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, during the relevant period, of all recipients to whom the input service is attributable.

Conditions for Distribution:

As per sub-section (2) of Section 20 of CGST Act, and ISD may distribute credit only on the following conditions:
 
a) The credit can be distributed to the recipients against document with prescribed details;
 
b) The amount of the credit distributed shall not exceed the amount of credit available for distribution;
 
c) The credit of tax period on input services attributable to a recipient of credit shall be distributed only to that recipient;
 
d) The credit of tax paid attributable to all or more than one recipient of credit shall be distributed only amongst such recipients to whom the input service is attributable and such distribution shall be pro-rata on the basis of turnover in a State of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable.
 

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