For Example, the head office of ABC Pvt Ltd is located in Hyderabad. ABC Pvt Ltd has its branches in Mumbai, Bangalore and Chennai. The head office has received the professional services on behalf of all its branches and received the tax invoice for the same. As the professional services are used by all the branches, the head office at Hyderabad cannot claim the entire input tax credit. The Input Tax Credit should be distributed to the branches located in Mumbai, Bangalore and Chennai.
The concept of ISD is a facility made available to business having a large share of common expenditure and where billing/payment is done from a centralized location. The mechanism is meant to simplify the input tax credit taking process for the entities and the facility is meant to strengthen the seamless flow of credit under GST
The ISD should maintain arithmetical accuracy and ensure that the credit distributed does not exceed the credit available with it for distribution.
In case your business is providing services across various geos, branches, would like to optimize and raise the accountability, consider speaking to Team GST Compliance with EZTax.in to know more, help you be compliant, and get the maximum ITC possible.
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