ISD Compliance Made Mandatory from April 2025: Is Your Business Ready?

10 Feb, 2025

Mandatory Input Service Distributor (ISD) Mechanism from 1st April 2025 under GST

From 1st April 2025, ISD registration and compliances will be mandatory for the taxpayers under GST who have multi-state presence in India . The Taxpayers need to gear up and set up accounting /ERP/Other systems in place for smooth implementation of the ISD mechanism.
 
Who will be impacted?
 
The provisions would apply to any taxpayer having presence in multiple states across India and receiving invoices on a single location for services commonly received for multiple locations.
Currently it is not mandatory to distribute the ITC of common services among the branches via the ISD mechanism and the taxpayer can opt for cross charge billing for the same.
However, with the introduction of ISD, all taxpayers having multi state GST registration will have to get themselves mandatorily registered as ISD in single/multiple states to distribute the ITC of common services.
Non-Compliance will have its own legal and other consequences.
 
Way Forward
 
The introduction of ISD will impact the taxpayers on macro as well as micro level.
At the macro level, taxpayers need to set up a system in place which requires them to take a separate mandatory single/multiple ISD registration which helps them distribute the common ITC to its different registrations.
At the micro level, the taxpayers need to identify such common ITC for the common transactions and carry out ITC distribution via ISD registration/s.
 
The taxpayers need to start strategizing right now as ISD will be rolled out from 1st April 2025.

Publisher: Monisha Ponnappa | Bizprout Expert Systems Private limited