Rules Rule 39 of CGST Rules i.e. Procedure for distribution of input tax credit by Input Service Distributor i.e. ISD Distribution of Tax Credit

Financial Year: 2017

Rule 39 of CGST Rules 2017

 

Procedure for distribution of input tax credit by Input Service Distributor

 

 

(1) An Input Service Distributor

shall distribute input tax credit

in the manner

and subject to the following conditions, namely,-

 

(a) the input tax credit

available for distribution in a month

shall be distributed in the same month

and the details thereof shall be furnished

in FORM GSTR-6

in accordance with the provisions of Chapter VIII of these rules;

 

(b) the Input Service Distributor shall, in accordance with the provisions of clause (d),

separately distribute the amount of

 

ineligible input tax credit

(ineligible under the provisions of sub-section (5) of section 17 or otherwise)

 

and

 

the amount of eligible input tax credit;

 

(c) the input tax credit

on account of central tax, State tax, Union territory tax and integrated tax

shall be distributed separately

in accordance with the provisions of clause (d)

 

(d) the input tax credit

that is required to be distributed in accordance with the provisions of clause (d) and (e) of sub-section (2) of section 20 (i.e Turnover wise Input Tax Credit to be allotted)

to one of the recipients "R1"

whether registered or not,

from amongst the total of all the recipients to whom input tax credit is attributable,

including the recipient(s) who are engaged in making exempt supply,

or are otherwise not registered for any reason,

shall be the amount, ?C1, to be calculated by applying the following formula -

 

C1 = (t1÷T) × C

 

where,

“C” is the amount of credit to be distributed,

“t1” is the turnover, as referred to in section 20, of person R1 during the relevant period, and

“T” is the aggregate of the turnover, during the relevant period, of all recipients to whom the input service is attributable in accordance with the provisions of section 20;

 

(e) the input tax credit on account of integrated tax

shall be distributed as input tax credit of integrated tax to every recipient;

 

(f) the input tax credit on account of

central tax and State tax or Union territory tax shall-

 

(i) in respect of a recipient

located in the same State or Union territory

in which the Input Service Distributor is located,

be distributed as input tax credit of

central tax and State tax or Union territory tax respectively;

 

(ii) in respect of a recipient

located in a State or Union territory

other than that of the Input Service Distributor,

be distributed as integrated tax

and the amount to be so distributed

shall be equal to the

aggregate of the amount of input tax credit of central tax and State tax or Union territory tax

that qualifies for distribution to such recipient in accordance with clause (d);

 

 

(g) the Input Service Distributor

shall issue an Input Service Distributor invoice,

as prescribed in sub-rule (1) of rule 54,

clearly indicating in such invoice

that it is issued only for distribution of input tax credit;

 

(h) the Input Service Distributor

shall issue an Input Service Distributor credit note,

as prescribed in sub-rule (1) of rule 54,

for reduction of credit

in case the input tax credit already distributed gets reduced for any reason;

 

(i)any additional amount of input tax credit

on account of issuance of a debit note

to an Input Service Distributor

by the supplier

shall be distributed in the manner and

subject to the conditions specified in clauses (a) to (f)

and the amount attributable to any recipient

shall be calculated in the manner provided in clause (d)

and such credit shall be distributed in the month

in which the debit note is included in the return in FORM GSTR-6;

 

(j) any input tax credit required to be reduced

on account of issuance of a credit note to the Input Service Distributor

by the supplier shall be apportioned

to each recipient in the same ratio

in which the input tax credit contained

in the original invoice was distributed in terms of clause (d),

and the amount so apportioned shall be-

 

(i) reduced from the amount to be distributed

 in the month

in which the credit note is included in the return in FORM GSTR-6;

 

(ii) added to the output tax liability of the recipient

where the amount so apportioned is in the negative

by virtue of the amount of credit under distribution

being less than the amount to be adjusted

 

(2) If the amount of input tax credit distributed by an Input Service Distributor

 is reduced later on for any other reason

for any of the recipients,

including that it was distributed to a wrong recipient

by the Input Service Distributor,

the process specified in clause (j) of sub-rule (1) shall apply, mutatis mutandis, for reduction of credit.

 

 

(3) Subject to sub-rule (2), the Input Service Distributor shall,

on the basis of the Input Service Distributor credit note specified in clause (h) of sub-rule (1),

issue an Input Service Distributor invoice to the recipient

entitled to such credit and

include the Input Service Distributor credit note

and the Input Service Distributor invoice

in the return in FORM GSTR-6 for the month

in which such credit note and invoice was issued.