Procedure for distribution of input tax credit by Input Service Distributor under GST

Rule-39 of CGST Rules 2017

39. 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,-

• 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;

• 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;
• 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);
• 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 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;

• the input tax cred­it on account of inte­grat­ed tax shall be dis­trib­uted as input tax cred­it of inte­grat­ed tax to every recipient;
• the input tax cred­it on account of cen­tral tax and State tax or Union ter­ri­to­ry tax shall- 
  • 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;

• 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);
• 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;
• 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;
• 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;
• 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-
• reduced from the amount to be dis­trib­uted in the month in which the cred­it note is includ­ed in the return in FORM GSTR‑6; or
• 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.