The Input Service Distribution (ISD) mechanism under the Goods and Services Tax (GST) regime in India plays a crucial role for businesses with multiple branches or units that receive common input services at a centralized location. To facilitate the seamless flow of Input Tax Credit (ITC) on such services to the respective recipient units, an ISD is required to issue a specific document known as an ISD invoice.
As stipulated by Rule 54(1) of the Central Goods and Services Tax (CGST) Rules, 2017, the ISD invoice is not a tax invoice for the supply of goods or services but rather a document solely for the purpose of distributing the eligible ITC of common input services. Therefore, it does not levy GST on the recipient units. The rule precisely outlines the essential particulars that must be present in an ISD invoice to ensure proper distribution and compliance.
Specific Details Required in an Input Service Distribution (ISD) Invoice Invoice under GST
Here’s an expanded look at the specific details mandated for inclusion in an Input Service Distribution (ISD) invoice as per Rule 54(1) of the CGST Rules, 2017:
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Name, address, and GSTIN of the ISD: This identifies the Input Service Distributor, which is the office or branch that has received the original tax invoice for the common input services and is responsible for distributing the associated ITC. The Goods and Services Tax Identification Number (GSTIN) is a unique 15-digit identification number assigned to every registered person under GST.
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A consecutive serial number unique for the financial year: Each ISD invoice issued during a financial year must bear a unique serial number. This number helps in maintaining a proper record of the distribution of credit. The rule specifies that this serial number should not exceed sixteen characters and can be a combination of alphabets, numerals, or special characters such as a hyphen (-) or a slash (/). Maintaining a unique and consecutive series is vital for audit and reconciliation purposes.
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Date of issue of the invoice: The date on which the ISD invoice is issued is a mandatory field. This date is crucial for determining the relevant tax period in which the credit is being distributed and for timely compliance, including the filing of the monthly return in FORM GSTR-6.
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Name, address, and GSTIN of the recipient to whom the credit is being distributed: This section clearly identifies the recipient unit or branch that is receiving the distributed ITC. The name, address, and GSTIN of this distinct person (registered under the same PAN as the ISD) are necessary to ensure that the credit is correctly allocated to the intended beneficiary.
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Name, address, and GSTIN of the supplier of input service: While the ISD invoice is issued by the ISD, it must also reference the original supplier of the input service whose credit is being distributed. Including the supplier’s name, address, and GSTIN helps in tracing the origin of the input service and the associated ITC.
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Serial number and date of the original invoice of the supplier of input service: This is a critical link to the original transaction where the ITC was generated. The serial number and date of the tax invoice issued by the supplier of the input service must be clearly mentioned in the ISD invoice. This allows for easy verification and reconciliation of the distributed credit with the initial inward supply.
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Amount of credit distributed: The ISD invoice must explicitly state the amount of Input Tax Credit being distributed to the recipient unit. This amount should align with the eligible ITC from the original supplier’s invoice, distributed in a manner consistent with the rules governing ISD, typically based on the turnover of the recipient units. Separate distribution of eligible and ineligible ITC is also required.
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Signature or digital signature of the ISD or their authorized representative: The physical or digital signature of the authorized person of the ISD is required to authenticate the invoice. This signifies the validation and issuance of the ISD invoice for the purpose of distributing the input tax credit.
It is important to note that the ISD mechanism is specifically for the distribution of ITC on input services and not on inputs or capital goods. Businesses with multiple GSTINs under the same PAN receiving common input service invoices are required to obtain mandatory ISD registration, effective from April 1, 2025. The proper issuance of ISD invoices with all the specified details is fundamental to ensuring accurate ITC distribution and compliance with the GST regulations. The details from these invoices are reported by the ISD in their monthly return, FORM GSTR-6, which is due by the 13th of the succeeding month.
An indicative format of the ISD Invoice is attached herewith: