In terms of section 2 (61) of CGST bill Input Service Distributor (ISD) is an office of supplier which receives tax invoice towards receipts of input services and distributes the credit of central tax, state tax or union territory tax paid on the said services under a prescribed documents to its own ‘recipient office of credit’ who is the supplier under the same PAN as that of ISD.
In other words, a business may have one central office and several other offices at various locations for smooth distribution or supply of goods or services. There may be a situation where tax invoices are raised by the supplier on central office only, consequently, input tax credit gets accumulated at central office and supply takes place from other locations. Obviously, the tax will be payable by the offices from where supply is effected. In such cases, distribution of credit of input tax will be done by central office to its other offices proportionately as per the prescribed provisions and procedure which is briefly outlined below
Relevant period: If the recipients of credit have turnover in their State or UT in the financial year preceding the year of distribution, the said financial year shall be the relevant period.
In case if some or all recipients doesn’t have turnover in their State or UT in the preceding financial year of distribution then the last quarter previous to the month of distribution when the details of turnover of all recipients are available shall be the relevant period.
Turnover: With respect to a registered person turnover refers to the value of turnover reduced by amount of any duty or tax levied under :-
a. entry 84 of List I (State List) of seventh schedule to the Constitution i.e. duties of excise on tobacco and other manufactured goods in India except alcoholic liquors, opium, Indian hemp, etc.
b. entry 51 & 54 of List II (Union List) of seventh schedule to the Constitution i.e. duties of excise on goods manufactured in the State like alcoholic liquors, opium and other narcotic drugs.
Disclaimer: The article is a brief insight of the concept, therefore, before arriving at any conclusion it is essential to examine the minute details of provisions on case to case basis.