Section 21 is the enforcement side of section 20. If an ISD distributes more credit than the rules allow — to the wrong unit, in the wrong proportion — the excess is recovered from the recipients that received it.
Key points
- Under section 21 of the CGST Act, 2017, credit distributed by an Input Service Distributor in contravention of section 20 is recoverable from the recipients, with interest.
- Recovery is made under section 73 or 74 and, for periods from 2024–25, section 74A (inserted from 01.11.2024).
The provisions
21Recovery of excess distribution
Statutory text
Where the Input Service Distributor distributes the credit in contravention of the provisions contained in section 20 resulting in excess distribution of credit to one or more recipients of credit, the excess credit so distributed shall be recovered from such recipients along with interest, and the provisions of section 73 or section 74 1[or section 74A],as the case may be, shall, mutatis mutandis , apply for determination of amount to be recovered.
*Enforced w.e.f. 1st July, 2017.
1. Inserted by section 120 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- Who pays if an ISD distributes too much credit?
- The recipient units that received the excess, with interest, through the demand provisions (section 21 CGST).
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
The liability falls on the recipients of the excess credit, not on the ISD, and is recovered "with interest" under the demand provisions — section 73 or 74, and from the Finance (No. 2) Act, 2024 (in force 01.11.2024) section 74A for periods from 2024–25.