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ICAI Releases Revised Handbook on Input Service Distributor (ISD) Under GST - CAclubindia

CAclubindia

The Institute of Chartered Accountants of India (ICAI), through its GST & Indirect Taxes Committee, has released the second edition of its "Handbook on Input Service Distributor (ISD) under GST", offering an updated and practical guide on the revised ISD framework effective from April 1, 2025.

The handbook, updated till September 26, 2025, provides comprehensive coverage of the legal provisions, procedures, and recent amendments governing the ISD mechanism under the Goods and Services Tax (GST). It aims to help professionals, businesses, and tax administrators understand the evolving credit distribution framework in light of the mandatory ISD registration introduced by the Finance Act, 2024.

In the foreword, ICAI President CA Charanjot Singh Nanda highlighted the institute's continuous role in strengthening India's GST ecosystem through professional education, policy feedback, and digital learning. He described the handbook as "a valuable reference for practitioners and stakeholders navigating the complex compliance landscape of GST credit distribution."

The publication explains in detail the distribution of Input Tax Credit (ITC) among distinct registrations of an entity, including practical illustrations, FAQs, and rule-based guidance. The Finance Act, 2024 and Finance Act, 2025 have now made the ISD mechanism compulsory for businesses receiving common input services at a central location, eliminating earlier flexibility between ISD and cross-charge.

Key topics covered in the revised handbook include

  • Mandatory ISD registration and updated procedure under Section 20 of the CGST Act and Rule 39 of the CGST Rules.
  • Treatment of reverse charge services and the use of technology for ISD invoicing and returns.
  • Detailed guidance on credit distribution methods, GSTR-6 filing, and penalties for excess credit allocation.
  • Clarifications on eligible and ineligible ITC, e-invoicing exemptions, and disciplinary accountability in ISD operations.

The handbook also incorporates recent notifications such as Notification No. 16/2025 - CT dated 17.09.2025, which extends ISD coverage to inter-State reverse charge transactions, and Circular clarifications on ITC distribution across branches.

With the 2025 amendments redefining how multi-State businesses manage input service credits, the ICAI's updated handbook serves as a timely knowledge resource for tax professionals, CFOs, and compliance teams ensuring smooth transition to the next phase of GST implementation.

Downloadable copy of the handbook has been attached