Input Service Distributor (ISD) is a concept under the Goods and Services Tax (GST) system in India. An ISD is a business office—such as a head office or corporate office—that receives invoices for input services used by different branches or units of the same business and distributes the eligible input tax credit (ITC) to those branches or units.
For example, if a company’s head office pays for services like legal consultancy or advertising that benefit other branch offices too, the head office can register as an ISD and distribute the input tax credit related to those services to the respective branches, based on usage.
This mechanism is especially relevant for businesses that have multiple locations or registrations under the same PAN across India. Registering as an ISD helps in better tax credit management and ensures compliance with GST laws by properly allocating credits to the right branch or unit.
Businesses need to register separately as an ISD under GST, even if they already have GST registration for other business activities. This ISD registration is required to legally distribute the input tax credit.
Filing ISD returns is also mandatory. Businesses must file Form GSTR-6 monthly to report how the input tax credit has been received and distributed. Not following ISD compliance requirements can lead to mismatches in tax credit claims and potential notices from GST authorities.
Using the ISD model helps businesses optimize their working capital and maintain clear records of input services and credits. To simplify GST registration, ISD setup, and monthly filings, expert assistance can be a time-saver. You can explore professional support options at FinTax24’s GST Solutions.
In summary, Input Service Distributor (ISD) allows for the smooth and legal distribution of input tax credits across different business units, supporting both financial accuracy and GST compliance.