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In our previous blog Understanding Input Service Distributor (ISD) in GST, we discussed the role of an ISD in GST. In this blog, we will discuss the various conditions applicable for the distribution of credit and method of distribution of credit to different units (branches).
The following are the conditions applicable for distribution of input credit by an ISD:
For example, Top-In-Town Home Appliances Ltd, is located in Bangalore, Karnataka. They also have branches located in Mysore (Karnataka), Chennai (Tamil Nadu), and Mumbai (Maharashtra). The unit in Bangalore is the Head office and they procure common services in bulk which are used by the other branches too.
Top-In-Town Home Appliances Ltd (HO) receives an invoice of Rs.1,00,000 + GST of Rs.18,000 towards advertisement services provided exclusively to the Mysore branch.
The total credit of Rs.18,000 will be distributed only to the Mysore branch.
The distribution shall be on pro rata basis based on the turnover for the previous year of such recipients. In the absence of turnover in previous financial year, the turnover of the last quarter of the month in which ITC is distributed, will be considered.
Let us consider the above example and understand in detail.
|Amount of credit to be distributed||Rs.90,000|
|Number of recipients of credit||Mysore and Chennai|
|Aggregate turnover of Mysore unit in previous financial year (PY)||Rs.60 Lakhs|
|Aggregate turnover of Chennai unit in previous financial year (PY)||Rs.90 Lakhs|
|Aggregate turnover of all recipients of credit||Rs.150 Lakhs|
The credit of Rs.90,000 will be distributed in the following manner:
e-Invoice from 1st October 2022 for Businesses with Turnover Exceeding 10 Crore
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