The Union Budget 2024 brings significant changes to the Goods and Services Tax (GST) law, particularly in the realm of Input Service Distributor (ISD). As recommended by the GST Council, amendments have been proposed in Section 2(61) and Section 20 of the CGST Act, 2017, impacting the mandatory nature of ISD. This article delves into the key alterations and their implications.
𝐔𝐧𝐢𝐨𝐧 𝐁𝐮𝐝𝐠𝐞𝐭 2024 𝐚𝐦𝐞𝐧𝐝𝐦𝐞𝐧𝐭 𝐢𝐧 𝐆𝐒𝐓 𝐋𝐚𝐰:
The amendments proposed in the Finance Bill 2024 focus on making ISD mandatory prospectively. The changes in Section 2(61) redefine “Input Service Distributor,” emphasizing its role as an office of the supplier responsible for receiving tax invoices related to input services. This includes services liable to tax under specific sections of the GST Act.
Simultaneously, Section 20 undergoes substitution, outlining the obligations of an Input Service Distributor. The revised Section 20 mandates that any office of the supplier, receiving tax invoices for distinct persons under Section 25, must register as an ISD. The ISD is then obligated to distribute the input tax credit for such invoices.
Furthermore, the amended Section 20 delineates the distribution process, specifying that the Input Service Distributor shall distribute the credit of central tax or integrated tax as per prescribed conditions. This includes credits related to services subject to levy of tax under specific sections of the GST Act.
The provision is set to come into force on a date appointed by Notification, adding a prospective element to its enforcement.
Conclusion: The Union Budget 2024 introduces crucial amendments to the GST law, emphasizing the mandatory nature of Input Service Distributor (ISD). The alterations in Section 2(61) redefine the role and responsibilities of ISD, while the substituted Section 20 outlines the registration and distribution obligations. Businesses need to stay abreast of these changes to ensure compliance with the evolving GST framework. The amendments are poised to have a profound impact on how input tax credit is managed and distributed, emphasizing the government’s ongoing efforts to streamline and enhance the efficiency of the GST system.
RELEVAT EXTRACT OF FINANCE BILL 2024–
11. Amendment of section 2.
In the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Central Goods and Services Tax Act), in section 2, for clause (61), the following clause shall be substituted, namely:–
‘(61) “Input Service Distributor” means an office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25, and liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20;’.
12. Substitution of section 20.
For section 20 of the Central Goods and Services Tax Act, the following section shall be substituted, namely: –
“20. (1) Any office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25, shall be required to be registered as Input Service Distributor under clause (viii) of section 24 and shall distribute the input tax credit in respect of such invoices.
(2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject to levy of tax under sub-section (3) or sub-section (4) of section 9 paid by a distinct person registered in the same State as the said Input Service Distributor, in such manner, within such time and subject to such restrictions and conditions as may be prescribed.
(3) The credit of central tax shall be distributed 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, in such manner as may be prescribed.”.
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