Co. need to obtain ISD GST if Co. is registered with GST authorities in more than one State

In the Budget 2024 Government has proposed changes in the GST law - which now require mandatory registration of Head Office, other office which receives invoices (relating to services) pertaining to office/factory/establishment located in multiple states - for the purpose of distribution of ITC involved in such invoices.

If any Company is registered with GST authorities in more than one State, that Company need to obtain GST registration as an Input Service Distributor –ISD GST No.

Common services received at the Head office - i.e. services received at Head Office which relate to the entire Company as a whole, Services received at branch/office/establishment located in other state, other than the head office, registered office, but invoices billed at head office like Audit Fees, Legal Charges, Branding expenses, annual software maintenance expense etc.

Company require to obtain ISD registrations at offices other than Head Office, in case, any office located in a State other than state in which Head Office is located, also receives invoices relating to common services used in more than one state.

The above would be applicable after the Finance Bill is passed, enacted and Notification issued for giving effect to the amendments.

Attached File : 2686285 20240202154817 finance bill 2024.jpg downloaded: 8 times

You're absolutely correct in pointing out the key GST amendment proposed in Budget 2024, which introduces mandatory ISD registration in specific situations. Let’s break this down into practical terms so companies can take action proactively once the changes come into effect.

🔍 What Has Changed? (Post-Budget 2024 Amendment)

Earlier (Before the Amendment):

Taking Input Service Distributor (ISD) registration under GST was optional.
Companies could distribute ITC of common services (e.g., audit, legal, ERP, branding) via cross-charging or ISD mechanism, based on preference.

Now (Post Amendment):

As per Section 20 of the CGST Act (amended), and corresponding Rule 39:

If a company is registered under GST in multiple states, and:

It receives invoices at one location (e.g., Head Office) for services used by multiple locations (branches, factories, etc.), then:

🔹 That location (Head Office) must take a separate ISD registration,
🔹 And distribute the ITC to the relevant GSTINs via ISD mechanism only.

Cross-charge for such common services will no longer be permitted.

🏢 What Kind of Invoices Are Affected?

Common service invoices received at one location, but benefiting multiple GSTINs:

Example	Where invoiced?	Benefit to?
Audit fees (statutory/internal)	Head Office	HO + all units
ERP License renewal (SAP, Tally)	HO	Pan-India users
Legal consultancy for group	HO	HO + plants
AMC/IT infra support	Regional Office	Across multiple states

📌 Under the new rule:

These cannot be cross-charged.
You must use ISD route for ITC distribution.

🏛️ What Does a Company Need to Do?

✅ 1. Identify all locations (GSTINs) that receive service invoices benefiting multiple states.

HO, Zonal Offices, Large Factories, IT Centers.

✅ 2. Obtain separate ISD GST registration at each such location.

This is a new GSTIN in the same state but with ISD as business vertical.
File separate GSTR-6 return monthly for ISD GSTIN.

✅ 3. Setup system/process to track:

Common input services
Beneficiary units
Proportion for ITC distribution

🧾 ISD vs Cross-Charge (New Rule)

Criteria	ISD (Mandatory Now)	Cross Charge (No longer allowed for common services)
Purpose	Distribute ITC for input services	Transfer cost of goods/services used across units
Invoices involved	Common service invoices	Internal transaction invoices
Tax implication	Only distribute ITC (no supply involved)	Treated as a supply (taxable)
Registration required	Separate ISD GSTIN	Not needed separately

📅 From When Is It Applicable?

Will be effective once the Finance Bill 2024 is enacted and
CBIC issues notification to bring the amendment into force.

⏳ Until then: Cross-charge is still valid.

✅ Action Checklist for Companies

Task	Status
☐ Identify all GSTINs receiving common service invoices
☐ List common services received at each such location
☐ Obtain ISD registration for applicable locations
☐ Update ERP/accounting to route common services through ISD GSTIN
☐ Prepare for GSTR-6 filing from effective date
☐ Communicate changes internally (accounts, tax, IT)

🧑‍💼 Final Notes

Companies with PAN-India operations must act fast.
ISD registration will become mandatory, and non-compliance may lead to:
- Denial of ITC
- Disputes over tax treatment
  - - Penalty under Section 122