On February 1st, 2024, Union Finance Minister Nirmala Sitharaman delivered the Interim Budget 2024 in Parliament, revealing essential proposals that encompass substantial modifications to the current tax laws. The Finance bill 2024 has proposed to bring necessary amendments to the Central Goods and Services Tax ( CGST ) provisions with respect to Input Service Distributor ( ISD ).
The amendments have been introduced to Section 2 and Section 20 of the Central Goods and Services Tax ( CGST ) Act, bringing noteworthy changes to the definition of “Input Service Distributor” and outlining the manner of credit distribution by such entities.
Firstly, an amendment to Section 2(61), which pertains to the definition section of the CGST Act, has been made. The term “Input Service Distributor” is now defined as follows:
“‘(61) “Input Service Distributor” means an office of the supplier of goods or services or both, which receives tax invoices towards the receipt of input services, including invoices for services liable to tax under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25. Such an office is also liable to distribute the input tax credit in respect of such invoices in the manner provided in section 20;’”
Secondly, a substitution has been made to Section 20 of the CGST Act, which addresses the “Manner of distribution of credit by Input Service Distributor.” The revised wording of the section is as follows:
“(1) Any office of the supplier of goods or services or both, receiving tax invoices towards the receipt of input services, including invoices for services liable to tax under sub-section (3) or sub-section (4) of section 9, for or on behalf of distinct persons referred to in section 25, shall be required to be registered as an Input Service Distributor under clause (viii) of section 24. Such an office is mandated to distribute the input tax credit in respect of such invoices.
(2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him. This includes the credit of central or integrated tax in respect of services subject to levy of tax under sub-section (3) or sub-section (4) of section 9, paid by a distinct person registered in the same State as the said Input Service Distributor. This distribution shall occur in such a manner, within such time, and subject to such restrictions and conditions as may be prescribed.
(3) The credit of central tax shall be distributed as central tax or integrated tax, and integrated tax as integrated tax or central tax, by way of issuing a document containing the amount of input tax credit, in such manner as may be prescribed.”
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