Type: Legislation
Effective Date: April 1, 2025
The Input Service Distributor (ISD) mechanism will become mandatory for claiming Input Tax Credit (ITC) under India’s Goods and Services Tax (GST) system from April 1, 2025. Businesses with multiple GST registrations under the same PAN must distribute ITC exclusively via ISD, replacing the previous option of cross-charge. Affected services include audit, software licensing, manpower supply, banking, and consultancy. The rule ensures correct ITC allocation, prevents tax inefficiencies, and requires separate ISD registration, invoice restructuring, IT system updates, and team training. Businesses must file monthly GSTR-6 returns, maintain compliance, and avoid penalties for incorrect ITC distribution. Non-compliance may lead to ITC denial, recovery with interest, and penalties starting at Rs. 10,000.
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