What is Input Service Distributor (ISD)?

Why it exists

GST registration is state by state, so a business selling from warehouses in several states has a separate GSTIN in each. Many services are bought centrally and billed to one office: software subscriptions, an agency's retainer, legal and audit fees. The credit lands in that office's GSTIN, even though the other GSTINs used the services. An ISD registration moves the credit to where it belongs.

When it is needed

From 1 April 2025, an office that receives invoices for input services used by distinct persons, meaning other GSTINs under the same PAN, must register as an ISD and distribute the credit through it. This covers services on which the office pays tax under reverse charge too. Before that date businesses could choose between an ISD and cross-charging the services between GSTINs.

The ISD is a separate registration in addition to the office's normal GSTIN. It distributes credit only: it does not make or receive supplies of goods, and it cannot distribute credit on goods or capital goods.

How credit is distributed

• Credit for a service used by one GSTIN goes only to that GSTIN.
• Credit for a service used by some or all GSTINs is shared among those that used it, in proportion to each one's turnover in its state during the previous financial year. If any of those GSTINs had no turnover in that year, the last quarter for which all of them have turnover is used instead.
• CGST and SGST credit goes as CGST and SGST to a GSTIN in the same state as the ISD, and as IGST to GSTINs in other states. IGST credit goes as IGST.
• Credit is distributed in the same month it is received, through an ISD invoice. Eligible and ineligible credit are distributed separately.
• Credit distributed wrongly is recovered from the GSTINs that received it, with interest, and a penalty can apply.

Returns and compliance

The ISD files GSTR-6 every month, showing the credit received and how it was distributed. Its GSTR-6A shows the invoices billed to it, and each receiving GSTIN sees its share of the credit in its own GSTR-2B. The ISD files no annual return.

For ecommerce sellers

Sellers who keep stock in marketplace fulfilment centres in several states often have most of their GSTINs set up only for those centres, while services are bought by the head office. Without an ISD, the credit for those services stays at the head office, which may not have enough output tax to use it. With an ISD, it reaches the GSTINs where marketplace sales and output tax actually arise.

Marketplace fees and shipping are usually billed directly to the GSTIN that made the sale, so the credit for those goes there without an ISD.