TMI BlogManner of distribution & recovery of ITC by Input Service Distributor in GST [section 20 & 21 of CGST Act]X X X X Extracts X X X X X X X X Extracts X X X X ..... tely. The Head Office would be procuring certain services which would be for common utilization of all units across the country. The bills for such expenses would be raised on the Head Office. But the Head Office itself would not be providing any output supply so as to utilize the credit which gets accumulated on account of such input services. Since the common expenditure is meant for the business of all units, it is but natural that the credit of input services in respect of such common invoices should be apportioned between all the consuming units. ISD mechanism enables such proportionate distribution of credit of input services amongst all the consuming units. Legal Provision relating to Input Service Distributor Compul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on territory tax and integrated tax shall be distributed separately in accordance with the provisions of clause (d); Distribution of credit on the basis of turnover[ Rule 39 clause (d) of CGST Rules] :- the input tax credit that is required to be distributed in accordance with the provisions of clause (d) and (e) of section 20(2) 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n input services attributable to a recipient of credit shall be distributed only to that recipient; the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period , to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period; the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Entry 92A: - Tax on inter-state sale (CST) Entry 51: - State Excise duty on liquor, opium etc. Entry 54: - Taxes on the sale or purchase of goods other than state supply Relevant period shall be if the recipients of credit have turnover in their States or Union territories in the financial year preceding the year during which credit is to be distributed, the said financial year; if some or all recipients of the credit do not have any turnover in their States or Union territories in the financial year preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all the recipients are available, previous t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount voluntarily along with interest if any by using FORM GST DRC-03 . 3. If the said recipient unit(s) does not come forward voluntarily, necessary proceedings may be initiated against the said unit(s) under the provisions of section 73 or section 74 , of the CGST Act as the case may be. FORM GST DRC-07 can be used by the tax authorities in such cases. 4. It is further clarified that the ISD would also be liable to a general penalty under the provisions contained in section 122(1)(ix) of the CGST Act. Examples Example 1:- The Corporate office of ABC Ltd., is at Bangalore, with its business locations of selling and servicing of goods at Bangalore, Chennai, Mumbai and Kolkata. Software license and maintenance is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stributed according to the ratio of turnover of all the units. The following illustration will clarify the issue Example 2:- M/s XYZ Ltd, having its head Office at Mumbai, is registered as ISD. It has three units in different states namely Mumbai , Jabalpur and Delhi which are operational in the current year. M/s XYZ Ltd furnishes the following information for the month of July, 2017 asks for permission to distribute the below input tax credit to various units. i. CGST paid on services used only for Mumbai Unit: Rs.3,00,000/- ii. IGST, CGST SGST paid on services used for all units: Rs.12,00,000/- Total Turnover of the units for the Financ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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