ISD Registration Under GST: Who Needs It and How to Apply

If one office of your business receives tax invoices for input services that are used by your other GST registrations under the same PAN, that office must register separately as an Input Service Distributor (ISD) and pass the credit on to the units that actually use the services. From 1 April 2025, the amended section 20 of the CGST Act says such an office "shall be required to be registered" as an ISD, and there is no turnover threshold for this registration.

This guide explains who falls inside the rule, how the registration works on the GST portal, how the credit is split, and the errors that trip up first-time ISDs.

What an Input Service Distributor is

Section 2(61) of the CGST Act defines an ISD as an office of a supplier that receives tax invoices for input services, including invoices for services taxed under reverse charge, for or on behalf of distinct persons referred to in section 25, and that is liable to distribute the input tax credit on those invoices in the manner laid down in section 20.

"Distinct persons" is the key phrase. Each GSTIN you hold under one PAN, whether in a different state or for a separate place of business in the same state, is treated as a distinct person. So the ISD is not a separate company. It is usually your head office or corporate office, given its own GSTIN only to collect and hand out credit on shared costs such as:

• statutory audit and consultancy fees billed to head office
• an ERP, CRM or cloud software subscription used by every branch
• group advertising and brand campaigns
• head-office rent where the space serves the whole business

The mechanism covers input services only. Credit on goods and capital goods cannot be routed through an ISD, which CBIC's own explainer on the topic states plainly.

What changed on 1 April 2025

Before April 2025, many businesses with several GSTINs chose between two routes for shared services: register an ISD, or have head office raise a taxable cross-charge invoice on each branch. The Finance Act, 2024 amended section 2(61) and substituted section 20, and Notification No. 16/2024-Central Tax brought those changes into force from 1 April 2025. The CGST Rules were amended to match: the new rule 39(1) was substituted by Notification No. 12/2024-Central Tax, and Notification No. 09/2025-Central Tax brought it into force on the same date.

Three practical effects follow:

• Registration is now framed as compulsory. An office that receives common input service invoices on behalf of distinct persons is required to register as an ISD under section 24(viii) and distribute the credit.
• Reverse charge services are inside the net. Credit of tax paid under reverse charge on common services can now be distributed too. The regular GSTIN with the same PAN and state code as the ISD pays the reverse charge tax, can then transfer that credit to the ISD through an invoice under rule 54(1A), and the ISD distributes it under rule 39(1A).
• The distribution formula is fixed by rule. Rule 39(1) spells out who gets how much, and in which tax head.

Whether a cross-charge invoice is still an acceptable route for a particular cost is a question worth settling with your CA, because the statutory wording now points firmly at the ISD route for invoices received on behalf of other registrations.

What CBIC clarified in October 2026

CBIC Circular No. 260/06/2026-GST, dated 26 October 2026, answered several questions businesses had been raising since the change. In summary:

• More than one ISD in a state is allowed. Where you hold separate registrations for separate business verticals or places of business within a state, each registrant that receives input service invoices on behalf of distinct persons is required to obtain an ISD registration.
• The recipient carries the section 16 conditions. The ISD distributes credit, but it is each recipient unit that must satisfy the eligibility conditions in sections 16 and 17, and that makes any reversals under section 17 read with rules 38, 42 and 43.
• When credit is "available for distribution". Once invoices appear in the ISD's GSTR-6A, credit becomes available only when the ISD has ascertained it is prima facie eligible. It must then be distributed in that month, with eligible and ineligible credit shown separately.
• Rule 54(1A) invoices are only a transfer. The value on an invoice issued to the ISD to transfer reverse charge credit is not part of the issuing unit's "turnover in State" for the rule 39 split or for refund calculations.

Alongside the circular, Notification No. 05/2026-Central Tax amended rules 39(1A) and 54(1A) with effect from 1 November 2026, so reverse charge credit on input services attributable to one or more distinct persons, not only common services, can be transferred to the ISD, and amended rule 60 so supplier invoices reach the ISD in GSTR-6A.

The circular also points out the cost of getting it wrong: distributing credit in breach of section 20 attracts a penalty under section 122(1)(ix) of ten thousand rupees or the credit irregularly distributed, whichever is higher, and any excess credit is recovered from the recipients with interest under section 21.

How to apply for ISD registration

Rule 8 of the CGST Rules requires every ISD to make a separate application for registration as such, even if the same office already holds a normal GSTIN. The application is made in Form GST REG-01 on the GST portal. The flow, as the portal presents it today, is:

1. Part A. Go to Services, then Registration, then New Registration. Choose Taxpayer in the "I am a" field, pick the state where the ISD office sits, and enter the legal name as per PAN, the PAN itself, and the email and mobile number of the primary authorised signatory. Verify both by OTP to get a Temporary Reference Number (TRN).
2. Part B. Log in with the TRN. In the business details tab, select Input Service Distributor (ISD) as the reason to obtain registration.
3. Fill in the tabs. Add promoters or directors, the authorised signatory, and the principal place of business, which is the office that will receive the common invoices. Upload proof of address and the authorisation letter or board resolution for the signatory.
4. Verify and submit. Companies and LLPs sign with a Class 2 or higher DSC. Others can use EVC. Complete Aadhaar authentication when the portal prompts, after which you receive an Application Reference Number (ARN).
5. Respond to queries. If the officer raises a clarification, answer it in time. Once approved, the registration certificate is issued and the ISD gets its own GSTIN.

Check the field labels on the live portal before you begin, because screen wording changes from time to time.

How the credit is split: a worked example

Take Kaveri Kitchenware Pvt Ltd. Its corporate office in Bengaluru holds an ISD registration in Karnataka. The company also has three regular GSTINs: a factory in Karnataka, a depot in Maharashtra and a showroom in Tamil Nadu.

In October 2026 the corporate office receives a single invoice from a Bengaluru software vendor for an ERP licence that every unit uses. Value ₹10,00,000, GST at 18% charged as CGST ₹90,000 and SGST ₹90,000, so total credit of ₹1,80,000.

Rule 39(1)(e) says credit attributable to all recipients is split pro rata on each recipient's turnover in its state during the relevant period. Because all three units had turnover in the preceding financial year, the relevant period for distribution during FY 2026-27 is FY 2025-26.

• Karnataka factory turnover FY 2025-26: ₹6 crore
• Maharashtra depot turnover: ₹3 crore
• Tamil Nadu showroom turnover: ₹1 crore
• Total: ₹10 crore

Apply the rule 39(1)(f) formula, C1 = (t1 / T) x C:

• Karnataka factory: 6/10 x ₹1,80,000 = ₹1,08,000. Same state as the ISD, so it is distributed as CGST ₹54,000 and SGST ₹54,000.
• Maharashtra depot: 3/10 x ₹1,80,000 = ₹54,000. Different state, so the CGST and SGST share is distributed as IGST ₹54,000.
• Tamil Nadu showroom: 1/10 x ₹1,80,000 = ₹18,000, distributed as IGST ₹18,000.

The corporate office issues an ISD invoice to each unit under rule 54(1), stating that it is issued only for distribution of input tax credit, and reports the distribution in its October GSTR-6. Each unit then sees the credit in its own records and claims it subject to sections 16 and 17.

Now suppose the same month brings a ₹2,00,000 marketing invoice that relates only to the Tamil Nadu showroom launch. Rule 39(1)(c) says credit attributable to one recipient goes only to that recipient, so the full credit on that invoice goes to Tamil Nadu, not across all three.

Monthly compliance once you are registered

• Return: section 39(4) requires an ISD to file a return for every calendar month within thirteen days after the month ends. That return is GSTR-6, built from the inward invoices auto-populated in GSTR-6A.
• Timing: credit available for distribution in a month is distributed in that same month.
• Separation: eligible and ineligible credit (for example, items blocked under section 17(5)) are distributed separately, and CGST, SGST/UTGST and IGST are distributed separately.
• Supplier credit notes: if a vendor issues a credit note to the ISD, the reduction is apportioned to recipients in the same ratio as the original distribution.

Common mistakes to avoid

• Waiting for a threshold. There is no turnover limit for ISD registration. If the office receives shared input service invoices for other GSTINs, the rule applies.
• Routing goods through the ISD. Laptops, furniture or stationery bought centrally cannot be distributed as ISD credit.
• Using the wrong turnover period. Rule 39 uses the preceding financial year where all recipients had turnover in it, and only otherwise the last quarter for which details are available.
• Spreading exclusive costs. A service used by one unit must go to that unit alone.
• Leaving out reverse charge services. Common services taxed under reverse charge, such as legal fees billed to head office, can now be distributed, but only after the same-state regular GSTIN pays the tax and transfers the credit under rule 54(1A).
• Booking the credit at head office. The ISD distributes. It does not keep and use the credit against its own output tax.

hellobooks< / a > -helps-you-keep-isd-credit-straight">How HelloBooks helps you keep ISD credit straight

HelloBooks is GST accounting software, and its multi-entity books let you run each GSTIN, including the ISD registration, as its own entity under one login, with consolidation when you need the company-wide view. In practice it helps in a few concrete ways:

• Tag shared invoices by location or class so you can see which costs are common and which belong to one unit.
• Record ISD distribution entries as journals with approval, so a second person checks the split before it posts, and the audit trail shows who approved it.
• Reconcile each unit's GSTR-2A/2B against its purchase records, and prepare GSTR-1 and GSTR-3B for the regular GSTINs.
• Get due-date alerts from the compliance calendar for the GST returns of your regular GSTINs.

You still prepare and file the ISD return on the GST portal, and your CA should review the first few months of distribution until the process is settled.

This is general information as of November 2026, not tax or legal advice. GST rules change often, so check the CBIC notifications and circulars or speak to a qualified CA about your own registrations.