ISD under place of supply, Goods and Services Tax - GST

[Venkata K]

Dear Sir / Madam

My factory is located in Karnataka and holds regular GST registration and ISD registration. We have branches in Haryana and Maharashtra. The office of Haryana branch is corporate office of our company and having regular GST registration and it is rented building. Following are my quires

1 in view of ISD registration, whether rent invoice of Haryana office should be obtained on ISD or regular GST registration?

2 If rent invoice is issued on ISD how to distribute such services under place of supply concept

Posts / Replies

[Shilpi Jain]

Take the rental invoice in ISD and the distribution from ISD is only due to the reason that it is an expense attributable to the other branches also. So PoS should not be a reason not to distribute the credit.

[YAGAY andSUN]

Your queries touch upon the nuances of Input Service Distributor (ISD) mechanism under GST, particularly with respect to rental invoices and place of supply (PoS).

Here's a point-by-point response based on applicable GST law and interpretive guidance:

1. Should the Rent Invoice of the Haryana Office Be Issued to ISD or to Regular GST Registration?

Answer:
The rent invoice of the Haryana office should be issued to the regular GST registration of the Haryana branch, not to the ISD registration. Here’s why:

• ISD is only a mechanism for distributing credit, not a separate place of business.
• A service such as rent — which is tied to a specific location and place of supply — must be invoiced to the GSTIN of the state where the property is located. This is mandated under Section 12(3)(a) of the IGST Act, which provides that:

“the place of supply of services directly in relation to an immovable property shall be the location of the immovable property.”

Hence, since the rented office is located in Haryana, the landlord must issue the tax invoice to the Haryana GSTIN, not to the ISD (which would typically be in Karnataka).

2. If the Rent Invoice Is Taken Under ISD, Can the Credit Be Distributed Based on Expense Attribution, Even If PoS Is Different?

Answer:
From a compliance perspective, credit should ideally not be taken under ISD for location-specific services like rent tied to immovable property in another state.

However, assuming rent is wrongly or intentionally invoiced to the ISD, here's what the law and interpretation suggest:

• ISD is permitted to distribute ITC even where the place of supply differs, as long as the credit is eligible and expense is attributable to more than one location.
• In your case, if the corporate office rent is used for company-wide activities (e.g., administrative, marketing, management), it may be attributable to multiple units and can arguably be distributed.
• Distribution should follow Rule 39 of CGST Rules, which does not restrict distribution solely based on PoS; rather, it permits allocation in proportion to turnover or usage.

However, this is a grey area, and risk of dispute exists because the original place of supply is Haryana, and distributing it to other states could be challenged by the department on the grounds of incorrect ITC flow.

⚠️ Best Practice / Recommendation:

• Receive rent invoices on the Haryana GSTIN (regular registration).
• If the rent is used for HO/admin functions across branches, cross-charge the common costs from Haryana to Karnataka and Maharashtra, instead of routing via ISD.
• Reserve ISD for common input services like software licenses, consulting, advertising, etc., where PoS is not tied to immovable property.

📝 Conclusion:

Scenario	Recommended Action
Rent invoice for Haryana premises	Issue to Haryana regular GSTIN
Want to allocate rent across states	Use cross-charge from Haryana to other branches
Using ISD for rent (not recommended)	Distribute only if invoice is on ISD and expense relates to all branches, but ensure strong justification

***

[Sadanand Bulbule]

Personally I opine that rent paid for factory located in Karnataka cannot be distributed to other branches/offices located in Haryana and Maharashtra under ISD. Even if you want to distribute it,  then you would pop up in the red flag zone and face audit. Decide wisely.

[Fathima Thabsheera]

1. Whether the rent invoice of Haryana office should be obtained on ISD or regular GST registration?

Where the corporate office located in Haryana is functioning as a shared service center or performs centralized functions (such as HR, Finance, Admin, Legal, etc.) that benefit multiple branches of the company (e.g., units in Karnataka, Maharashtra, etc.), then the input service in the form of rent paid for the corporate premises is to be treated as a common input service.  Then As per the provisions of Section 20 of the CGST Act, 2017 and Rule 39 of the CGST Rules, 2017 the rent expense is routed through the ISD of Haryana.

In such a scenario, as per the provisions of Section 20 of the CGST Act, 2017 read with Rule 39 of the CGST Rules, 2017, the rent invoice should be obtained in the name of the ISD registration of Haryana.

The input tax credit (CGST + SGST of Haryana) availed by the ISD should then be distributed as IGST to the respective recipient units, in accordance with Rule 39(1)(f)(ii), which mandates that credit of CGST and SGST of one State must be distributed as IGST when the recipient is located in a different State.

[Sadanand Bulbule]

 Also refer Discussion Issue Id: - 117139 Dated: 5-4-2021

[k.lakshmipati rao]

Dear Experts-

Preamble: 1.My factory is located in Karnataka and holds regular GST registration and ISD registration. 2. whether rent invoice of Haryana office should be obtained on ISD or regular GST registration?

My understanding- 1) In case the Rental Services are from an unregistered person in Haryana, then GST liability to be discharged under RCM, by issuing a self invoice by Haryana office, as if transaction pertains to Haryana office.  2) In view of services rendered by Haryana office are common, the Haryana office can issue Tax Invoice represents Rental Services on ISD in the state of Karnataka, for onward distribution of ITC to respective Units/Branches of Company.

In similar lines, if the Rental Services are from Registered person in Haryana, while observing POS rules, the Tax Invoice should be obtained on Regular Registration belongs to  Haryana office, and inturn, Haryana office can issue Tax Invoice represents Rental Services on ISD in the state of Karnataka, for onward distribution of ITC to respective Units/Branches of Company.

[vijay kumar]

Invoice shall be issued in the name of the service receiver. As per rent agreement, whoever has entered into the lease /rent deed and liable to pay the rent is the receiver. Hence, receiving invoice is not an option but a legal compulsion. In your case, it seems Haryana corporate office should receive the invoice.

To distribute the ITC, Haryana corporate office should obtain ISD.. Effective 1.4.2025, cross charge option is not there against ISD. If there are common services which have to be distributed, ISD registration is mandatory. 

[k.lakshmipati rao]

Dear Mr. Vijay Kumar ji,

Noted your remarks that "To distribute the ITC, Haryana corporate office should obtain ISD.. Effective 1.4.2025, cross charge option is not there against ISD. If there are common services which have to be distributed, ISD registration is mandatory". 

Query: In case the Rental Services are from an unregistered person in Haryana, then GST liability is required to be discharged under RCM, Thus, is it required to be discharged by ISD in Haryana corporate office OR to be discharged by Regular Registration belongs to Haryana office.

In view of ISD responsibility is restricted only to distribute common Input on Services, and can not issue outward supply invoices and file Monthly Returns in GSTR-1 and GSTR-3B, My understanding is that RCM to be discharged by Regular Registration belongs to  Haryana office and issue Tax Invoice, which represents Rental Services on ISD in the state of Haryana, for onward distribution of ITC to respective Units/Branches of Company.

[k.lakshmipati rao]

AUTHORITY FOR ADVANCE RULING, TELANGANA

2021 (12) TMI 464 - AUTHORITY FOR ADVANCE RULING, TELANGANA - IN RE: M/S. NILE LIMITED,

No.- A. R. Com/40/2018 TSAAR Order No. 25/2021

Dated.- October 11, 2021

SRI B. RAGHU KIRAN, IRS, AND SRI S. KASI VISWESWARA RAO, MEMBER

[ORDER UNDER SECTION 98(4) OF THE CENTRAL GOODS AND SERVICES TAX ACT, 2017 AND UNDER SECTION 98(4) OF THE TEALANGANA GOODS AND SERVICES TAX ACT, 2017.]

Under rule 54(1A)(a), of the CGST rules inserted vide Notification No. 3/2018 dated: 23.01.2018, a registered person having same PAN and State code and having Input Service Distributor (ISD) may issue an invoice or, a credit note or a debit note in order to transfer the credit of the common input services to the ISD.

[YAGAY andSUN]

Any order under AAR is personam not in rem.