section 20 of CGST Act,2017, Manner of distribution of credit by Input Service Distributor

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Manner of distribution of credit by Input Service Distributor, section 20 of CGST Act,2017

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The below post explains about Manner of distribution of credit by Input Service Distributor under section 20 of CGST Act,2017.

Section 20 of CGST Act, 2017 explains Manner of distribution of credit by Input Service Distributor as below: (The amendments if any will also be updated here soon).

The extract of Section 20 of CGST Act,2017 quoted below:

20  Manner of distribution of credit by Input Service Distributor

20. (1) The Input Service Distributor shall distribute the credit of central tax as central

tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a

document containing the amount of input tax credit being distributed in such manner as may

be prescribed.

(2) The Input Service Distributor may distribute the credit subject to the following

conditions, namely:––

(a) the credit can be distributed to the recipients of credit against a document

containing such details as may be prescribed;

(b) the amount of the credit distributed shall not exceed the amount of credit

available for distribution;

(c) the credit of tax paid on input services attributable to a recipient of credit shall

be distributed only to that recipient;

(d) the credit of tax paid on input services attributable to more than one recipient

of credit shall be distributed amongst such recipients to whom the input service is

attributable and such distribution shall be pro rata on the basis of the turnover in a

State or turnover in a Union territory of such recipient, during the relevant period, to

the aggregate of the turnover of all such recipients to whom such input service is

attributable and which are operational in the current year, during the said relevant

period;

(e) the credit of tax paid on input services attributable to all recipients of credit

shall be distributed amongst such recipients and such distribution shall be pro rata on

the basis of the turnover in a State or turnover in a Union territory of such recipient,

during the relevant period, to the aggregate of the turnover of all recipients and which

are operational in the current year, during the said relevant period.

Explanation.––For the purposes of this section,––

(a) the “relevant period” shall be––

(i) if the recipients of credit have turnover in their States or Union

territories in the financial year preceding the year during which credit is to

be distributed, the said financial year; or

(ii) if some or all recipients of the credit do not have any turnover in

their States or Union territories in the financial year preceding the year

during which the credit is to be distributed, the last quarter for which

details of such turnover of all the recipients are available, previous to the

month during which credit is to be distributed;

(b) the expression “recipient of credit” means the supplier of goods or

services or both having the same Permanent Account Number as that of the

Input Service Distributor;

(c) the term ‘turnover’, in relation to any registered person engaged in the

supply of taxable goods as well as goods not taxable under this Act, means the

value of turnover, reduced by the amount of any duty or tax levied under entry

84 of List I of the Seventh Schedule to the Constitution and entry 51 and 

54 of List II of the said Schedule.

The above information clarifies about Manner of distribution of credit by Input Service Distributor under section 20 of CGST Act,2017.  

If you have any comments about Section 20 of CGST Act, 2017 explaining Manner of distribution of credit by Input Service Distributor, share below your thoughts:

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