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We have discussed in our previous article about Input Service Distributor. It means an office of the supplier which receives tax invoices relating to the receipt of input services and then issues a prescribed document for the purposes of distribution of such credit of central tax, State tax, integrated tax or Union territory tax paid on the said goods or services to a supplier of taxable goods or services or both having the same Permanent Account Number as that of the said office.
Here, we will discuss the ITC Rules regarding the distribution of ITC by such Input Service Distributor.
As per ITC Rules[1], the Input tax credit can be claimed by any input service distributor on the basis of any of the following documents:
Rule 4 of ITC Rules issued by the Government, specify these conditions and procedures that are to be followed by an Input Service Distributor while distributing input tax credit:
C1 = C × ( T1/ T ) Here, C1 =ITC share of specific recipient C= Total ITC to be distributed T1=Turnover of specific recipient T= Total turnover of all recipients
The provision of demand and recovery gets attracted as if the tax wasn’t paid, at a time when excess credit is distributed to any recipient.
Recovery of excess credit distributed with interest will be initiated against recipient and not the Input Service Distributor.
The concept of ISD under GST is a legacy going on from the service tax regime. The CGST Rules of 2017 provides the procedural conditions to be complied by ISD, the manner and quantum of ITC to be distributed by ISD to eligible recipients, return to be filed and how to deal with ITC on credit notes and debit notes issued to the ISD. For more information on ITC rules or related laws, contact Enterslice.
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