What is Input Service Distribution under GST (ISD)?
You’ve probably heard the term Input Service Distribution under GST (ISD) while dealing with GST, right? At first glance, it might sound like one of those complicated tax jargons, but it’s actually quite simple once it’s explained. So, let’s break it down.
Breaking Down Input Service Distribution under GST
ISD stands for Input Service Distribution under GST. Big name, simple meaning.
It’s basically used when a company has multiple branches, and one of the branches (usually the head office) gets the invoice for some service that’s being used by all the branches. That branch can then distribute the GST credit from that service to the other branches. That’s it. Simple idea, right?
Real-World Example of GST Credit Distribution with ISD
Let’s say there’s a company called Futurex Management Solutions. Its head office is in Mumbai. And it’s got other offices in Delhi, Hyderabad, and Bengaluru.
Now, suppose the Mumbai office hires a digital marketing agency to run ads for the whole company—like, not just for Mumbai, but for all branches. The agency sends the bill to Mumbai only (because that’s where the head office is). The GST is charged there too.
But the thing is—this service is helping all branches, not just Mumbai.
So how does Delhi or Bengaluru claim their share of the tax credit?
How ISD Under GST Works for Branches
The Mumbai office can act as an Input Service Distribution under GST. It will take that credit and split it between all the branches based on usage or proportion. Like… divide the benefit, divide the credit. Fair enough, right?
But yeah, there’s a small catch.
To do this, the Mumbai office (or whichever branch is acting as ISD) has to take a separate GST registration as an ISD. Yup, separate.
Also, it doesn’t deal with goods—just services. And it doesn’t sell anything—it just passes on credit to the other branches.
Every month, this ISD must file a return too—it’s called GSTR-6. Just a way to officially report how the credits were passed on.
Why Input Service Distribution under GST Matters?
Here’s the thing—without ISD, all that GST credit would get stuck in one place, even though the whole company benefited from the service.
By using ISD:
• You avoid wastage of credit.
• Branches don’t pay extra tax unnecessarily.
• Everything stays clean and transparent.
• You stay GST-compliant, which saves headaches later during audits.