Section 20 of GST – Manner of distribution of credit by ISD

Section 20 of GST – Manner of distribution of credit by Input Service Distributor. Check out Detailed Analysis of GST Section 20 of GST Act 2017 – Manner of distribution of credit by Input Service Distributor Under GST. 

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Section 20 of GST – Manner of distribution of credit by Input Service Distributor

(1) The Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central, by way of issue of a document containing, the amount of input tax credit being distributed in such manner as may be prescribed.

(2) The Input Service Distributor may distribute the credit subject to the following conditions, namely:

  • (a) the credit can be distributed to the recipients of credit against a document containing such details as may be prescribed;
  • (b) the amount of the credit distributed shall not exceed the amount of credit available for distribution;
  • (c) the credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient;
  • (d) the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipient(s) to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union Territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period;.
  • (e)the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union Territory of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operational in the current year, during the said relevant period.

Explanation.– For the purposes of this section,–

(a) the “relevant period” shall be–

  • (i) if the recipients of credit have turnover in their States or Union Territories in the financial year preceding the year during which credit is to be distributed, the said financial year; or
  • (ii) if some or all recipients of the credit do not have any turnover in their States or Union Territories in the financial year preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all the recipients are available, previous to the month during which credit is to be distributed.

(b) the expression of ‘recipient of credit’ means the supplier of goods or services or both having the same Permanent Account Number as that of Input Service Distributor.

(c) the term ‘turnover’ in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entries 84 and entry 92A3 of List I of the Seventh Schedule to the Constitution and entry 51 and 54 of List II of the said Schedule

Related provisions of the Statute:

Section or Rule Description
Section 2(61) Definition of ‘Input Service Distributor’
Section 16 Eligibility and conditions for taking input tax credit
Section 17 Apportionment of credit and blocked credits
Rule 54 Tax invoice in special cases
Rule 65 Form and manner of submission of return by an Input Service Distributor

Introduction

This Section sets forth the way input tax credit (of services) is distributed to supplier of goods or services or both of same entity having same PAN. Procedure for distribution is given in Rule 39 of Central Goods and Service Tax Rules, 2017.

Frequently Asked Questions

Whether CGST and IGST credit can be distributed by ISD as IGST credit to units located in different States?

Yes. CGST credit can be distributed as IGST and IGST credit can be distributed as IGST by an ISD for the units located in different States.

Whether SGST credit can be distributed as IGST credit by an ISD to units located in different States?

Yes. ISD can distribute SGST credit as IGST for the units located in different States.

What are the documents through which the credit can be distributed by ISD?

An ISD can distribute credit to its recipient units by way of an ISD invoice prescribed in Rule 54 of the CGST Rules, 2017

How to distribute common credit among all the units of a ISD?

The common credit used by all the units can be distributed by ISD on pro rata basis i.e. based on the turnover of each unit to the aggregate turnover of all the units to which credit is distributed.

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