The definition of Input Service Distributor under the previous tax regime includes, “an office of the producer/ manufacturer of final products or one who provides output services
Therefore, available CENVAT to ISD is distributed to its units and manufacturers outsourced. In parallel lines to the existing structure, GST has also kept the concept of Input Service Distributor aligned in the similar way.
Input Service Distributor under GST model includes, an office of supplier of services/goods
A document can be issued by ISD to any other office bearing the same PAN as that of ISD. Credit can’t be distributed to service providers or outsourced manufacturers unlike previous tax model. This could probably because of the reason that there is a shift of taxable event to supply from manufacture. The liability of tax will be raised at the time of supply which will be borne by the ISD when available input tax credit limit is utilized.
As per the GST law, following shall be termed as inappropriate distribution of tax credit by the Input Service Distributor:
Such inappropriate distribution shall be recovered from the recipients(s) with applicable interest and recovery provisions will apply as per rule 66 or 67.
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