New Delhi: Companies with presence in multiple states and branch offices that distribute common input tax credit will have to register as input service distributors (ISD) with the GST authorities by April 1, 2025.

Amendment in GST law

The government amended the Goods and Services Tax (GST) law through the Finance Bill 2024 in February, saying businesses with multi-state GST registrations will have to mandatorily register themselves as ISDs to distribute any input tax credit (ITC) for services received among their branches.

The arrangement for sharing of ITC is prescribed in the GST rules and broadly the normal ITC is divided in proportion to the turnover of different branches having the same PAN. The Central Board of Indirect Taxes and Customs (CBIC) has now notified April 1, 2025 as the cut-off date for all companies with multi-state branches to register as ISD.

There will be an increase in operational transparency

Moore Singhal Executive Director Rajat Mohan said the move represents an effort to enhance operational transparency and will help accurately distribute tax credit on common invoices across states to taxpayers in a fair manner.

GST exempted sectors such as liquor, petroleum, education, real estate and health will need to align their business processes to ensure effective management and distribution of tax credits, Mohan said.

Abhishek Jain, partner and head indirect tax, KPMG in India, said the government has given a reasonable period of implementation of ISD provisions, giving companies enough time to fully prepare. Jain said businesses should now start preparing strategically to ensure timely compliance readiness, including enhancing IT capabilities to conduct intensive testing before the go-live date.