Companies with multi-state presence to register as ISD with GST authorities

Companies having presence in multiple states and distributing common input tax credit with branch offices will have to register as Input Service Distributor (ISD) with GST authorities by April 1, 2025.

Through the Finance Bill, 2024, in February, the government had amended Goods and Services Tax (GST) law to say that businesses having multi-state GST registration will have to have themselves mandatorily registered as ISD to distribute among its branches any input tax credit (ITC) for services availed.

The mechanism for sharing of ITC is prescribed in GST rules and broadly the common ITC is apportioned in the ratio of turnover of different branches having same PAN.

The Central Board of Indirect Taxes and Customs (CBIC) has now notified April 1, 2025, as the cut-off date for all companies with multi-state branches to register as ISD.

Moore Singhi Executive Director Rajat Mohan said the move represents an effort to enhance operational transparency and will help taxpayers to accurately distribute tax credit on common invoices across states in an appropriate manner.

"GST exempt sectors like alcohol, petroleum, education, real estate and health will need to align their business processes to ensure effective management and distribution of tax credits," Mohan added.

KPMG in India Partner and Head Indirect Tax Abhishek Jain said the government has given a reasonable period of implementation of ISD provisions allowing companies sufficient time to prepare thoroughly".

"Now businesses should begin to strategically gear up to ensure timely compliance readiness including enhancing IT capabilities to conduct thorough testing before the go-live date," Jain added.