What is Input Service Distributor (ISD) under GST?

ISD is a mechanism for businesses with multiple GST registrations to distribute input tax credit (ITC) on common input services received at one location (usually head office) to other locations (branches) under the same PAN.

Who needs ISD registration from April 2025?

Any business with multiple GSTIN registrations under the same PAN that receives input services at one location and uses them across multiple locations must obtain ISD registration by April 1, 2025, as per Finance Act 2024.

How do I apply for ISD registration?

Apply on the GST portal under Registration > Amendment. Select 'Input Service Distributor' under the additional registration type. Upload required documents and complete Aadhaar authentication. Approval is typically within 7 working days.

What documents are required for ISD registration?

Required documents include proof of business address, PAN card copy, list of all GSTINs under the same PAN, bank account details, and authorization letter if applied by an authorized signatory.

How does TallyPrime handle ISD invoices?

TallyPrime supports ISD invoice generation under Gateway of Tally > Vouchers > ISD Invoice. Configure the distribution ratio for each branch GSTIN, and TallyPrime will automatically generate ISD invoices for credit distribution.

ISD Registration Under GST: Who Needs It and How to Apply from April 2025

The Finance Act 2024 introduced a game-changing requirement for businesses with multiple GST registrations under the same PAN: mandatory Input Service Distributor (ISD) registration from April 1, 2025. Previously optional, the ISD mechanism now becomes compulsory for any office that receives input services on behalf of multiple branches. Notification No. 16/2024-CT dated August 6, 2024 formalized this change, requiring businesses to register as ISD to distribute Input Tax Credit (ITC) across locations. This guide explains who must register, the benefits, compliance requirements, and step-by-step registration process.

What is an Input Service Distributor (ISD)?

Definition: An office that receives tax invoices for input services on behalf of multiple GSTINs under same PAN
Purpose: Facilitates distribution of ITC on common services (rent, IT services, consulting) to branches
Legal basis: Section 20(1) of CGST Act, made effective from April 1, 2025
Example scenarios: Head office paying rent for branch offices, centralized IT services, group insurance premiums
Key limitation: ISD mechanism applies only to services, not goods (inputs or capital goods)

Who Must Register as ISD from April 1, 2025?

Mandatory requirement: Any business with multiple GSTINs under same PAN
Head office scenario: HO receives invoices for services used by branches
Branch network: Chain stores, manufacturing units, regional offices
No turnover threshold: Mandatory regardless of aggregate turnover
Exemptions: Single GSTIN businesses, businesses receiving only goods (not services)
Check your status: If you have multiple GSTINs and receive common service invoices, ISD is mandatory

Benefits of ISD Registration

Centralized ITC management: Simplifies credit distribution across multiple locations
RCM ITC distribution: New provision allows distribution of reverse charge ITC (previously restricted)
Compliance efficiency: Streamlines reporting for multi-location businesses
Proper ITC utilization: Ensures credits reach the branches that need them
Audit clarity: Clear documentation trail for ITC distribution
Tax optimization: Prevents ITC lapse or under-utilization

Legal Framework and Timeline

Finance Act 2024: Section 148A amendments introducing mandatory ISD
Notification No. 16/2024-CT: Dated August 6, 2024, operationalizing ISD requirement
Effective date: April 1, 2025 (start of FY 2025-26)
Section 20(1) CGST Act: Specifies ISD registration and distribution requirements
Grace period: No grace period; compliance expected from April 1, 2025

How ISD Mechanism Works

Step 1: ISD office receives tax invoice for input services (e.g., rent, IT services)
Step 2: ISD distributes ITC to recipient branches based on defined formula (pro-rata or as per usage)
Step 3: ISD files GSTR-6 by 13th of following month, declaring ITC distribution
Step 4: Recipient branches view distributed ITC in auto-generated GSTR-6A
Step 5: Branches claim ITC in their monthly GSTR-3B returns
Distribution formula: Proportionate to turnover, headcount, or actual usage (must be documented)

ISD Registration Process: Step-by-Step

Step 1: Log in to GST portal with existing GSTIN credentials
Step 2: Navigate to Services > Registration > Amendment of Registration Core Fields
Step 3: Fill GST REG-01 form, select ISD status in Serial No. 14
Step 4: Provide details of recipient GSTINs (branches that will receive distributed ITC)
Step 5: Upload required documents (authorization letter, address proof of ISD office)
Step 6: Submit application and await approval (ARN generated)
Step 7: GST Officer reviews and approves ISD status
Step 8: ISD registration effective; GSTIN updated with ISD designation
Timeline: Typically 7-15 working days for approval

GSTR-6 Filing Requirements

Monthly return: ISD must file GSTR-6 by 13th of following month
Contents: Details of input services received, ITC available, ITC distributed to each recipient GSTIN
No payment required: GSTR-6 is informational return, no tax payment
Late fee: Rs 100 per day (Rs 50 CGST + Rs 50 SGST) for delayed filing
TallyPrime support: Configure ISD in TallyPrime to auto-generate GSTR-6
Reconciliation: Recipient branches must verify GSTR-6A matches ISD distribution

RCM ITC Distribution: New Provision

Game changer: ISD can now distribute reverse charge mechanism (RCM) ITC
Previous restriction: ISD could not claim or distribute RCM ITC, creating compliance gaps
Applicability: Services like GTA, advocate fees, director remuneration paid by ISD office
Compliance simplification: Centralized RCM payment and ITC distribution
Example: Head office pays advocate fees under RCM, distributes ITC to branches that used legal services

Consequences of Non-Compliance

Penalty risk: Failure to register as ISD may attract penalties under GST Act
ITC disallowance: Excess ITC claims by branches without proper ISD distribution can be recovered
Interest liability: Section 50 interest on erroneous ITC claims
Audit exposure: Increased risk of GST audits and scrutiny
ITC reversal: Mismatches in ITC claims can trigger reversal demands
Operational disruption: Delayed ITC availability affects working capital

ISD Configuration in TallyPrime

Enable ISD feature: F11 > Statutory & Taxation > Enable Input Service Distributor
Create ISD voucher type: For recording ITC distribution entries
Define recipient GSTINs: Configure branch locations in company master
Distribution formula setup: Pro-rata by turnover or custom allocation
Auto-generate GSTR-6: Use TallyPrime's GST compliance features
Track distributed ITC: Monitor ITC flow from ISD to recipient branches
Reconciliation: Match ISD distribution with branch GSTR-6A and GSTR-3B

Best Practices for ISD Management

Document distribution formula: Maintain clear methodology for ITC allocation
Centralize service procurement: Route common services through ISD office
Monthly reconciliation: Verify ISD distribution matches recipient claims
Maintain registers: ISD should keep detailed ITC distribution register
Train accounts teams: Ensure ISD office and recipient branches understand the process
Leverage technology: Use TallyPrime or ERP systems to automate ISD accounting
Compliance calendar: Track GSTR-6 due dates to avoid late fees

Confused about ISD registration or need help setting up ITC distribution workflows? Mark IT Solutions specializes in multi-location GST compliance and TallyPrime implementation. Our team can handle your ISD registration, configure TallyPrime for automated GSTR-6 filing, and train your staff on the new requirements. Contact us for expert ISD setup and support.