Procedure for distribution of Input Tax Credit by ISD.
An Input Service Distributor should follow the below procedures while distributing the input tax credit:
1. Input tax credit should be distributed in the same month in which it is received
2. The details of the input tax distributed should be furnished in GSTR 6
3. Ineligible input credit should be separately distributed
4. ITC on account of IGST, CGST, SGST, UTGST should be distributed separately
5. ITC of IGST should be distributed as IGST only
6. ITC of CGST, SGST or UTGST should be distributed as CGST, SGST or UTGST if the ISD and recipient are located in the same state/union territory
7. ITC of CGST, SGST or UTGST should be distributed as IGST as aggregate of CGST and SGST or UTGST if the ISD and recipient are located in different states/union territories
8. ISD has to issue invoice as per rule 54(1) clearly indicating in such invoice that it is issued only for distribution of ITC
9. ISD has to issue credit note in case of reduction in the ITC already distributed
10. ISD can also distribute any additional ITC through a debit note
11. When ITC is reduced through credit note, ITC should be reduced in the same ratio by which it was distributed earlier in the original invoice. Credit is either reduced from the distributed credit in the month in which the credit note is included in GSTR 6 or added to output tax liability when the distributed credit is lesser than the reducing credit
12. If the distributed credit is reduced later on due to any reason for any recipient, including credit distributed to wrong recipient, the same process as mentioned in Point No.11 shall be followed. Such wrong credit can be distributed through an invoice to the eligible recipient. Such credit note and invoice should be recorded in return GSTR 6 in the same month
Calculation Input Credit to be distributed
Input credit which is to be distributed to any recipient, whether registered or not, including the recipient who is making exempted supply shall be calculated in the following manner:
C1 = (t1 ÷ T) x C
C – Amount of input credit to be distributed
t1 – Turnover of a particular recipient to whom the credit to be distributed
T – Aggregate turnover of all recipients, eligible to receive the ITC
C1 – ITC amount is to be distributed to a particular recipient
Example:
Total ITC to be distributed (C) – Rs.1,00,000/-
Turnover of Coimbatore Branch (t1) – Rs.5,00,000/-
Total turnover of all branches (T) – Rs.20,00,000/-
ITC distribution amount :
Rs.25,000/- = (500000 ÷ 2000000) x 100000
ITC to be distributed to Coimbatore branch is Rs. 25,000/- (C1)
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