What is ISD (Input Service Distribution)?
you’ve probably heard the term ISD while dealing with GST stuff, right? And honestly, at first glance, it sounds like one of those complicated tax jargons. But it’s not that bad once someone explains it in a simple way. So here goes.
Let’s break it down ISD.
ISD stands for Input Service Distributor. 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?
Here’s a real-world example – makes it easier to get.
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?
This is where ISD comes in.
The Mumbai office can act as an Input Service Distributor. 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 does it matter?
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.