Distribution of Input Tax Credit

By Registrationwala

1st May 2017

 

Input Service Distributor implies an office of the maker or maker of conclusive items or supplier of output service, which receives invoices towards purchase of input services from the supplier of input services and further, disseminate the Input Tax Credit by issuing invoices, bill or challan to such makers or producer or supplier.

Input service distributor should in regard of credit disseminated issue a invoice/bill/challan to each of the beneficiary of the credit. ISD disperses credits to its units giving taxable services or assembling and manufacturing excisable products.

Conditions for distribution of input tax credit by an ISD

The accompanying are the conditions pertinent for dispersion of input credit by an ISD:

1. An ISD invoice plainly specifying 'issued only for distribution of input tax credit', ought to be issued by the merchant to the beneficiary of credit. The unit to which the input tax credit is dispersed is alluded as the 'Recipient of credit'. The tax invoice ought to contain the accompanying subtle elements; 

Name, address, and GSTIN of the Input Service Distributor

A continuous serial number containing only alphabets or/ and numerals, one of a kind for a financial year

Date of its issue

Name, address, and GSTIN of the provider of services, the credit in regard of which is being circulated, and the serial number and date of invoice issued by such provider

Name, address, and GSTIN of the beneficiary to whom the credit is being circulated

The measure of credit circulated, and

Signature or digital signature of the provider or his approved delegate

2. The measure of credit conveyed should not surpass the measure of credit accessible for dispersion.

3. The input tax credit accessible for dispersion in a month should be circulated around the same time, and the details of interest of the same shall be furnished in Form GSTR - 6.

4. The input tax credit ought to be dispersed just to that branch which has devoured the input services. For instance:

Top-In-Town Home Appliances Ltd, is situated in Bangalore, Karnataka. They also have branches situated in Mysore (Karnataka), Chennai (Tamil Nadu), and Mumbai (Maharashtra). The unit in Bangalore is the Head office and they obtain basic administrations in mass which are utilized by alternate branches as well.

Top In-Town Home Appliances Ltd (HO) receives an invoice of Rs.1,00,000 + GST of Rs.18,000 towards promotion administrations gave solely to the Mysore branch.

The aggregate credit of Rs.18,000 will be circulated just to the Mysore branch.

5. The credit of tax paid on input services, profited by more than one beneficiary of credit or all, ought to be distributed just among such beneficiaries or all beneficiaries.

Method of Input Tax Distribution

The circulation might be on master rata basis on the turnover for the earlier year of such beneficiaries. Without turnover in past financial year, the turnover of the last quarter of the month in which ITC is disseminated, will be considered.

Let us consider the above example and understand in detail.

Amount of credit to be distributed

Rs.90,000

Number of recipients of credit

Mysore and Chennai

Aggregate turnover of Mysore unit in previous financial year (PY)

Rs.60 Lakhs

Aggregate turnover of Chennai unit in previous financial year (PY)

Rs.90 Lakhs

Aggregate turnover of all recipients of credit

Rs.150 Lakhs

The credit of Rs.90,000 will be distributed in the following manner:

6. Any extra amount of input tax credit by virtue of issuance of a 'debit note' by a provider to the ISD might be allotted to every beneficiary in a similar proportion in which the input tax credit contained in the original invoice was disseminated. The circulation ought to be on the basis of strategy delineated in Point No. 5

7. In the event that the input tax credit already circulated gets diminished for any reason, an ISD credit note ought to be issued for the decrease of credit. The accompanying subtle elements must be caught in the ISD credit note :

Name, address, and GSTIN of the ISD

A sequential SL.No containing alphabets or numerals or special characters, for example, hyphen or dash or slash, symbolized as,  “-“ “/” respectively, and any combination thereof, unique for a financial year

Date of its issue

Name, address, and GSTIN of the beneficiary to whom the credit is disseminated

The amount of credit disseminated, and

The signature or digital signature of the ISD or his approved agent

8. Any input tax credit required to be lessened because of issuance of a 'credit note' by a provider to ISD ought to be apportioned to every beneficiary in a similar proportion in which the input tax credit contained in the original invoice was disseminated. The distribution should be on the basis of method illustrated in Point No. 5

9. The lessening amount so apportioned ought to be:

Lessened from the amount to be distributed in the month in which the credit note is incorporated in the return in FORM GSTR – 6 and added to the output tax liability of the beneficiary,  in case the amount so apportioned is negative.

 

 

 

Distribution of Input Tax Credit

2017-05-01