Input Service Distributor (ISD) in GST (Goods and Services Tax) is a mechanism for businesses to distribute the input tax credit (ITC) on services to their branches or units that use those services.

ISD is a registered office or head office that receives invoices for input services and distributes the ITC to different units (branches) under the same PAN.

Applicable only to Input Services:

ISD can only distribute ITC on input services, not on goods or capital goods.

Who should register as ISD?

Any business having multiple branches but receiving common input services at a centralized location should register as an ISD.

Distribution of ITC:

The ITC must be distributed in proportion to the turnover of each branch in a particular state.

Separate ISD Registration:

ISD must obtain a separate GST registration even if it is already registered as a normal taxpayer.

Return Filing:

ISD needs to file GSTR-6 to distribute the ITC.

Mandatory Input Service Distributor (ISD) Registration 

Previously, businesses with multiple GST registrations under the same PAN had the flexibility to either use the Input Service Distributor (ISD) mechanism or adopt a cross-charge model to allocate common input services, such as rent, audit fees, and software licenses, across their various units. While many favored the cross-charge method for its perceived simplicity, it often led to complications in ITC distribution and tax reconciliation.
However, effective April 1, 2025, it will be compulsory for such taxpayers to obtain ISD registration. Under the revised framework, businesses must issue ISD invoices and file GSTR-6 returns to distribute Input Tax Credit (ITC) to different branches. This move is aimed at enhancing transparency, traceability, and ensuring standardised compliance in the allocation of shared input services.