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Confused about E-invoicing for Input Service Distributors under GST? Explore the regulations, exemptions, and implications in this detailed analysis.

We all are aware that E – invoicing was introduced from Oct 2020 onwards. There is a confusion whether E – Invoicing is applicable to Input Service Distributors or not. In this article, lets discuss the same in detail.

Notification No. 13/2020 – Central Tax dated 21st March 2020 read with Notification No. 17/2022 -Central Tax dated 1st August 2022

As per this notification, E – invoicing is applicable for all registered persons other than those registered persons referred to in Rule 54(2), 54(3), 54(4) and 54(4A) of CGST rules whose Aggregate Turnover in a FY exceeds Rs. 10 Crores.

Registered Persons referred to in Rule 54 of CGST Rules

1) Input Service Distributor

2) Insurer or Banking Company or a Financial Institution, including a NBFC

3) Goods Transport Agency

4) Supplier supplying Passenger Transportation Services

4A) A registered person supplying services by way of admission to exhibition of cinematograph films in multiplex screens

Whether E – invoicing is applicable for Input Service Distributor?

Notification No. 13/2020 – Central Tax dated 21st March 2020, persons exempted from E – invoicing does not mention Rule 54(1). Hence plain reading of the Notification gives an understanding that E – invoicing is applicable for Input Service Distributor as Rule 54(1) is not covered under the exemption.

Rule 48(4) of CGST Rules

The invoice shall be prepared by such class of registered persons as may be notified by the Government, on the recommendations of the Council, by including such particulars contained in FORM GST INV-01 after obtaining an Invoice Reference Number by uploading information contained therein on the Common Goods and Services Tax Electronic Portal in such manner and subject to such conditions and restrictions as may be specified in the notification.

Section 2(61) – Input Service Distributor

“Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices issued under section 31 towards the receipt of input services and issues a prescribed document for the purposes of distributing the credit of central tax, State tax, integrated tax or Union territory tax paid on the said services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office.

Section 20 of CGST of Act

The Input Service Distributor shall distribute the credit of central tax 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 being distributed in such manner as may be prescribed.

Document for distribution of Input Tax Credit by Input Service Distributor

Rule 54(1) of CGST Rules

(1) An Input Service Distributor invoice or, as the case may be, an Input Service Distributor credit note issued by an Input Service Distributor shall contain the following details:-

(a) name, address and Goods and Services Tax Identification Number of the Input Service Distributor;

(b) a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters- hyphen or dash and slash symbolised as -“-”, “/” respectively, and any combination thereof, unique for a financial year;

(c) date of its issue;

(d) name, address and Goods and Services Tax Identification Number of the recipient to whom the credit is distributed;

(e) amount of the credit distributed; and

(f) signature or digital signature of the Input Service Distributor or his authorised representative:

Provided that where the Input Service Distributor is an office of a banking company or a financial institution, including a non-banking financial company, a tax invoice shall include any document in lieu thereof, by whatever name called, whether or not serially numbered but containing the information as mentioned above.

(1A) (a) A registered person, having the same PAN and State code as an Input Service Distributor, may issue an invoice or, as the case may be, a credit or debit note to transfer the credit of common input services to the Input Service Distributor, which shall contain the following details:-

i. name, address and Goods and Services Tax Identification Number of the registered person having the same PAN and same State code as the Input Service Distributor;

ii. a consecutive serial number not exceeding sixteen characters, in one or multiple series, containing alphabets or numerals or special characters -hyphen or dash and slash symbolised as “-” and “/” respectively, and any combination thereof, unique for a financial year;

iii. date of its issue;

iv. Goods and Services Tax Identification Number of supplier of common service and original invoice number whose credit is sought to be transferred to the Input Service Distributor;

v. name, address and Goods and Services Tax Identification Number of the Input Service Distributor;

vi. taxable value, rate and amount of the credit to be transferred; and

vii. signature or digital signature of the registered person or his authorised representative.

(b) The taxable value in the invoice issued under clause (a) shall be the same as the value of the common services. 

Section 2(66) of CGST Act

Section 2(66) defines Invoice as “Invoice” or “Tax Invoice” means the tax invoice referred to in section 31. 

Section 31 of CGST Act

Extract of Section 31

(1) A registered person supplying taxable goods shall, before or at the time of,-

(a) removal of goods for supply to the recipient, where the supply involves movement of goods; or

(b) delivery of goods or making available thereof to the recipient, in any other case, issue a tax  invoice showing the description, quantity and value of goods, the tax charged thereon and such other particulars as may be prescribed:

Provided that the Government may, on the recommendations of the Council, by notification, specify the categories of goods or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed.

(2) A registered person supplying taxable services shall, before or after the provision of service but within a prescribed period, issue a tax invoice, showing the description, value, tax charged thereon and such other particulars as may be prescribed:

E-invoicing for Input Service

Provided that the Government may, on the recommendations of the Council, by notification,-

(a) specify the categories of services or supplies in respect of which a tax invoice shall be issued, within such time and in such manner as may be prescribed;

(b) subject to the condition mentioned therein, specify the categories of services in respect of which-

(i) any other document issued in relation to the supply shall be deemed to be a tax invoice; or

(ii) tax invoice may not be issued.

Analysis of Section 31

Section 31(2) starts with the words “A Registered Person supplying taxable services…..”

Section 2(102) of CGST Act

“Services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;

Section 7(1)(a) of CGST Act

“supply” includes-

all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;

As per section 7(1)(a) Supply includes all forms of Supply of Goods or Services such as

  • Sale
  • Transfer
  • Barter
  • Exchange
  • Licence
  • Lease
  • Rental
  • Disposal

 

ü  made or agreed to be made

ü  for a consideration

ü  by a person

ü  in the course or furtherance of business

 

As per the above definition of Supply there should be a Consideration for a transaction or Activity to be considered as supply.

Section 2(31) of CGST Act

“consideration” in relation to the supply of goods or services or both includes-

(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;

(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:

Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply;

The term Consideration starts with the words “Payment made or to be made, whether in money or otherwise….”

In case of Input Service Distributor, there is only Distribution of Credit and there is no payment to be made. When there is no Consideration, the Activity or Transaction cannot be treated as Supply unless it is covered under Schedule I.

Schedule I

ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION

(1) Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

(2) Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:

Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

(3) Supply of goods-

(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or

(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

(4) Import of services by a person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

Analysis

When we analyze Schedule I, Input Service Distributor is not covered under any of the paragraphs in Schedule I.

Hence the activity by Input Service Distributor cannot be considered as “Supply” as there is no “Consideration”.

The document issued by Input Service Distributor is not covered under the term “Tax Invoice” as Tax Invoice as per section 31 starts with the words “A Registered Person supplying taxable services…..”

Since the activity undertaken by Input Service Distributor is not a supply, the document issued by Input Service Distributor is not an Invoice / Tax Invoice which is a requirement for “E – Invoice”

Conclusion

Hence we conclude that, though Input Service Distributor is not covered under the Exemption notified by Notification 13/2020 – Central Tax dated 21st March 2020, but still E – invoicing is not applicable for Input Service Distributor owing to the above.

*****

Disclaimer: The contents of this article are for information purposes only and does not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

Author Bio

Chartered Accountant by profession, faculty by passion. Faculty for Indirect Taxation for CA, CMA and CS students. Author of Book titled "GST - MCQ's for CA IPCC". Faculty for Certificate course in GST at ICAI. Speaker on GST in various forums and study circles. Email : [email protected] View Full Profile

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