FAQs on ISD Registration

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FAQ's on ISD Issue..!! • From April 1, 2025, offices receiving tax invoices for common input services must register as Input Service Distributors (ISDs) under Indian GST, as per the Finance Act, 2024. • It seems likely that not every office needs to register, only those receiving invoices for multiple branches, with no clear exceptions noted. Here are few FAQ's that could be helpful to reduce the confusion. Please bookmark/save this post.

Q1: We currently distribute common expenses through cross-charge. Do we need to register as an ISD after April 1st, 2025? A: Yes. The option to distribute ITC through cross-charge will no longer be available for input services received on behalf of distinct persons. You will need to register each office receiving such invoices as an ISD and distribute the ITC as per Section 20 of the CGST Act.

Q2: We have a head office that receives invoices for marketing services that benefit all our branches across India. Does our head office need to register as an ISD? A: Yes. Since the marketing services benefit multiple branches (which are distinct persons with separate GSTINs), the head office receiving the invoices must register as an ISD.

Q3: Our software is hosted centrally, and the head office pays the invoice. All our branches use the software. Does the head office need to be registered as an ISD? A: Yes. Since the software benefits multiple branches, the head office receiving the invoices needs to register as an ISD.

Q4: We have one GSTIN and operate in a single state. Do these changes impact us? A: Potentially no. If you only have one GSTIN, you are not considered to have 'distinct persons'. Therefore, the ISD provisions may not apply unless you are planning to obtain multiple GSTINs within the same state.

Q5: How do we distribute ITC under the new ISD rules? A: You must distribute ITC as per the provisions of Section 20 of the CGST Act. This means distributing the ITC proportionately based on the turnover of the recipients (distinct persons) in the relevant period (preceding financial year or quarter, as applicable).

Q6: We receive RCM invoices for legal services used by all our units. How should we distribute the ITC on these invoices? A: The office receiving the RCM invoices must register as an ISD and distribute the ITC proportionately to the recipient units based on their turnover, as per Section 20 of the CGST Act.

Q7: Can a business have multiple ISDs? A: Yes, if multiple offices receive invoices for common services, each may need to register as an ISD, depending on the procurement structure.

Q8: What happens if a business does not register as ISD when required? A: Non-compliance may lead to penalties, such as Rs. 10,000 or the amount of irregularly distributed ITC, and potential recovery actions U/s 21.

Q9: Can an ISD distribute ITC to entities with different PANs? A: No, an ISD can distribute ITC only to recipients having the same PAN as that of the ISD ARR 9810638155