The arrangement for sharing of ITC is prescribed in the GST rules and broadly the common ITC is divided in proportion to the turnover of different branches having the same PAN. The Central Board of Indirect Taxes and Customs (CBIC) has now notified April 1, 2025 as the cut-off date for all companies with multi-state branches to register as ISD.
Companies having presence in multiple states and distributing common input tax credit with branch offices will have to register as Input Service Distributors (ISD) with the GST authorities by April 1, 2025.
GST law amended
In February, through the Finance Bill 2024, the government amended the Goods and Services Tax (GST) law, stating that businesses with multi-state GST registrations must mandatorily register themselves as ISDs to distribute any input tax credit (ITC) for services received among their branches. The arrangement for sharing of ITC is prescribed in the GST rules and broadly the common ITC is divided in proportion to the turnover of different branches with the same PAN. The Central Board of Indirect Taxes and Customs (CBIC) has now notified April 1, 2025, as the cut-off date for all companies with multi-state branches to register as ISDs.
Operational transparency will increase
Moore Singhi Executive Director Rajat Mohan said the move represents an effort to increase operational transparency and will help taxpayers accurately distribute tax credit on common invoices across states in a fair manner.
Mohan said GST exempted sectors such as liquor, petroleum, education, real estate and health will need to align their business processes to ensure effective management and distribution of tax credits.
Abhishek Jain, Partner and Head Indirect Tax, KPMG in India, said the government has given a reasonable period of implementation of ISD provisions, giving companies enough time to prepare thoroughly. Jain said businesses should now start preparing strategically to ensure timely compliance readiness, including enhancing IT capabilities to conduct intensive testing before the go-live date.
