Cross-Charge Mechanism Valid for Distribution of Common ITC Prior to April 01, 2025

Last updated: 07 April 2026
Quick Summary
The Karnataka High Court has ruled that businesses can use the cross-charge mechanism to distribute common Input Tax Credit (ITC) to their branch offices by issuing invoices. This ruling applies to the period before April 1, 2025. The court found that orders disregarding the CBIC's Circular No. 199/11/2023-GST, which clarified this option, were illegal and without jurisdiction. The judgement allows businesses to choose between the cross-charge method and the Input Service Distributor (ISD) mechanism for distributing ITC.

Court :
Karnataka High Court

Brief :
The Hon’ble Karnataka High Court in the case of M/s. Micro Labs Limited v. Joint Commissioner of Central GST & Ors. [WP No. 8409 of 2025, order dated December 09, 2025] held that distribution of common input tax credit (ITC) through cross-charge mechanism by raising invoices under Section 31 of the CGST Act is permissible, and any order passed in disregard of the CBIC’s Circular No. 199/11/2023-GST dated July 17, 2023 is illegal, arbitrary, and without jurisdiction.

Citation :
WP No. 8409 of 2025, order dated December 09, 2025

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Bimal Jain
Published in GST
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