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Distribution of credit by the Input service distributor

The manner of distribution of credit by the Input service distributor (Section 20)

PAN of ISD and Recipient of Credit

It is mandatory that the Input Service Distributor and the recipient of credit are persons having the same PAN, even they are located in the same State. 


Manner of distribution of credit where distributor and recipient are located in different states

The Input Service Distributor shall distribute the credit as follows: 

• Central tax as central tax or integrated tax; and,

• Integrated tax as integrated tax or central tax, and 

• State tax as State tax or integrated tax.   


Distribution of SCST as CGST or CGST as SGST

Section 20(1) does not permit distribution of CGST as SGST and vice versa.

Conditions applicable on distribution

Input Service Distributor can distribute the credit subject to the following conditions:

• The credit should be distributed to recipient against a document containing such details as given in Rule 54(1) of the CGST Rules, 2017; 

• The amount of credit distributed shall not exceed the amount of credit available for distribution; 

• The credit of tax paid on input service attributable to a recipient of credit shall be distributed only to that recipient; 

• If credit is attributable to more than one recipient, then it shall be distributed on pro rata basis of the turnover.


Recovery provisions in case of wrong distribution of credit

  • Recovery provisions can be initiated if the Input Service Distributor distributes credit in contravention of the law resulting in excess distribution of credit to one/ more recipients of credit.
  • Such credit can be recovered from the recipients along with applicable interest and the provisions of section 73 or section 74, as the case may be, shall, mutatis mutandis, apply for determination of amount to be recovered.

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