GST Jamku AIManner of distribution of credit by Input Service Distributor
Section 20(1)
The Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit being distributed in such manner as may be prescribed.
The process of distributing credit by an Input Service Distributor (ISD) is outlined in Section 20(1) of the tax regulations.
Credit Distribution Method
The ISD is responsible for distributing the credit of central tax as either central tax or integrated tax, and integrated tax as either integrated tax or central tax. This distribution is done through the issuance of a document specifying the amount of input tax credit being distributed. The specific manner of distribution is determined by the regulations and guidelines established for this purpose.
Ensuring Compliance
To ensure compliance with the regulations, the Input Service Distributor must adhere to the prescribed methods of credit distribution. This involves accurately documenting and specifying the amounts allocated to central tax and integrated tax in the issued document.
In summary, the Input Service Distributor plays a crucial role in the distribution of tax credits, following the guidelines set forth in Section 20(1) of the tax regulations.
Section 20(2)
The Input Service Distributor may distribute the credit subject to the following conditions, namely:
(a) the credit can be distributed to the recipients of credit against a document containing such details as may be prescribed;
(b) the amount of the credit distributed shall not exceed the amount of credit available for distribution;
(c) the credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient;
(d) the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period;
(e) the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operational in the current year, during the said relevant period.
Explanation for the purposes of this section,
(a) the "relevant period" shall be
(i) if the recipients of credit have turnover in their States or Union territories in the financial year preceding the year during which credit is to be distributed, the said financial year; or
(ii) if some or all recipients of the credit do not have any turnover in their States or Union territories in the financial year preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all the recipients are available, previous to the month during which credit is to be distributed;
(b) the expression "recipient of credit" means the supplier of goods or services or both having the same Permanent Account Number as that of the Input Service Distributor;
(c) the term "turnover", in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied [under entries 84 and 92A] of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule.
In this section, the Input Service Distributor is allowed to distribute credit under certain conditions. These conditions are as follows:
Distribution Against Document Details (a) The credit can be distributed to credit recipients based on a document containing prescribed details.
Limitation on Credit Amount (b) The amount of credit distributed should not exceed the available credit for distribution.
Credit Distribution to Specific Recipient (c) The credit of tax paid on input services, related to a specific credit recipient, should only be distributed to that recipient.
Pro Rata Distribution Among Multiple Recipients (d) If the credit of tax paid on input services is attributable to more than one recipient, it should be distributed among them in a pro rata manner. This distribution is based on the turnover in a State or Union territory of each recipient during the relevant period.
Pro Rata Distribution Among All Recipients (e) The credit of tax paid on input services attributable to all recipients should be distributed among them in a pro rata manner. This distribution is also based on the turnover in a State or Union territory of each recipient during the relevant period.
Explanation for Section 20(2): The following explanations clarify certain terms and timeframes within this section:
(a) Relevant Period
- If recipients had turnover in their States or Union territories in the financial year preceding the year of credit distribution, the relevant period is that financial year.
- If some or all recipients had no turnover in their States or Union territories in the financial year preceding credit distribution, the relevant period is the last quarter for which turnover details are available before the month of credit distribution.
(b) Recipient of Credit The term "recipient of credit" refers to the supplier of goods or services having the same Permanent Account Number as the Input Service Distributor.
(c) Turnover Definition In the context of any registered person engaged in the supply of taxable goods and goods not taxable under this Act, "turnover" means the value of turnover reduced by the amount of any duty or tax levied under specific entries in List I and List II of the Seventh Schedule to the Constitution.