India 
Canada
Mandatory ISD Registration under GST from April 1, 2025
Understanding Input Service Distributor (ISD)
An Input Service Distributor (ISD) is an office within a business that receives invoices for input services used across multiple branches and distributes the corresponding Input Tax Credit (ITC) under the same Permanent Account
Number (PAN). This mechanism ensures proper allocation of centrally utilized services.
| Aspect | Details |
| Mandatory Registration | Businesses with multiple GST registrations under the same PAN must register as an ISD. |
| Inclusion of RCM Services | ISD now includes services where tax is payable under the Reverse Charge Mechanism (RCM). |
| Proportional ITC Distribution | ITC must be allocated to branches based on their turnover. |
| Compliance Requirements | Timely ISD registration and return filing are mandatory. |
| Penalties for Non-Compliance | Misallocation or failure to register can result in penalties and interest. |
| Preparation Steps | Businesses must assess eligibility, register, track ITC, and educate teams. |
Key Changes Effective April 1, 2025
- Mandatory Registration: Businesses receiving invoices for common input services must register as an ISD to distribute ITC centrally.
- Inclusion of Reverse Charge Mechanism (RCM) Services: The amended ISD definition includes services where tax is payable under RCM, allowing their ITC distribution.
- Proportional ITC Distribution: ITC must be allocated based on the turnover of branches to ensure fair distribution.
Implications for Businesses
- Compliance Requirements: Businesses must obtain ISD registration and file returns regularly.
- Penalties for Non-Compliance: Incorrect distribution or failure to register as an ISD may lead to fines and interest on misallocated ITC.
Preparation Steps for Businesses
1. Assess Eligibility: Determine if ISD registration is required based on business structure and input services.
2. Register as ISD: Complete the registration on the GST portal.
3. Implement ITC Tracking Systems: Maintain records for accurate ITC distribution.
4. Educate Finance and Compliance Teams: Ensure awareness of new ISD rules and compliance protocols.
Conclusion
The mandatory ISD registration effective April 1, 2025, is a significant GST regulation change. Businesses must take proactive measures to ensure compliance, optimize tax credits, and avoid penalties. Early preparation will
be key to a smooth transition.
If you have any questions, please don’t hesitate to reach out to us using the contact details available on our website or the information provided below.
Regards,
CA. Akshay
Partner
Mobile: 8527238625
Email: infodelhi@corporategenie.in
