Registering as an Input Service Distributor

A company is registered in five States. Its head office buys the audit, the software licences and the advertising campaign for all five, and the supplier invoices the head office’s GSTIN. The tax on those invoices is credit that belongs, in part, to the other four registrations. Until 31 March 2025 the company could pass that credit on in either of two ways. It could register an Input Service Distributor (ISD), or it could raise its own tax invoices on the branches. From 1 April 2025 the law requires the first. That means a further registration, under the same PAN, used for one purpose only.

This guide covers that registration and the obligations that come with it. The general steps of a REG-01 application are in Applying for GST Registration: the Steps Every Applicant Takes.

What changed on 1 April 2025

The Finance Act, 2024 substituted the definition in section 2(61) by its section 11, and section 20 by its section 12. Notification No. 16/2024-Central Tax appointed “the 1st day of April, 2025” as the date both came into force. Section 20(1) now reads:

Any office of the supplier of goods or services or both which receives tax invoices towards the receipt of input services, including invoices in respect of services liable to tax under sub-section (3) or sub-section (4) of section 9 [of this Act or under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act, 2017], for or on behalf of distinct persons referred to in section 25, shall be required to be registered as Input Service Distributor under clause (viii) of section 24 and shall distribute the input tax credit in respect of such invoices.

The words in square brackets were added by the Finance Act, 2025. CBIC’s amendment notes date that change from 1 April 2025. It brings in services on which integrated tax is paid under reverse charge.

The old section 20 described what an ISD did. The new one requires an office that receives such invoices “for or on behalf of” distinct persons to register as an ISD and to distribute the credit. Section 24(viii) lists “Input Service Distributor, whether or not separately registered under this Act” among those who must register whatever their turnover. The office’s existing registration as a supplier therefore does not cover its role as an ISD.

Where cross-charging still fits

Circular No. 199/11/2023-GST of 17 July 2023 had said that a head office “has an option” to use the ISD route for common input services bought from third parties. It added that “as per the present provisions of the CGST Act and CGST Rules, it is not mandatory”. That answer depended on the law as it then stood, and the substituted section 20 has since changed that law. For third-party input services received for or on behalf of distinct persons, the statutory route is now ISD distribution.

The circular also dealt with services that the head office itself provides to its branches, which it called internally generated services. Those remain supplies between distinct persons under section 25(4), valued as the circular explains. They are not ISD credit. This guide does not deal with them further.

A separate application in REG-01

There is no separate ISD form. The first proviso to rule 8(1) of the CGST Rules provides that “every person being an Input Service Distributor shall make a separate application for registration as such Input Service Distributor”. The application is FORM GST REG-01. Item 14 of the form lists “Input Service Distributor” among the reasons for obtaining registration.

The portal’s user manual describes the choice: “all you need to do is select Input Service Distributor only, under Reason to obtain registration in the Business Details section of PART B”. It also records three portal-level points:

• Existing registration details are checked. The applicant enters an existing GSTIN of the same PAN, with its date of approval, under “Indicate Existing Registration”. The GSTIN must exist, and the approval date must match the actual date. GSTINs in Active, Cancelled, Suspended and Expired status are accepted at this check.
• Rule 9A may apply. Rule 9A, in force from 1 November 2025, allows registration electronically within three working days for applicants under rule 8 identified on data analysis and risk parameters. For an ISD application, the portal evaluates eligibility after the ARN is generated. It requires successful Aadhaar authentication and a valid GSTIN of the same PAN belonging to an active regular taxpayer. If those are met, it sends an OTP to the primary authorised signatory of that GSTIN. The manual says the application is approved electronically when the OTP is validated in time and the ARN’s risk score is low or medium. Otherwise it goes to the jurisdictional officer.
• Rule 14A is not available. If the applicant opts for the low-liability registration under rule 14A, the “Input Service Distributor only” option is disabled.

The application, step by step

1. In Part A of REG-01, the applicant enters the PAN of the business, the State in which the ISD office is located, and an e-mail address and mobile number. These are verified by one-time passwords, and the portal issues a Temporary Reference Number.
2. In Part B, on Business Details, the applicant selects “Input Service Distributor only” as the reason for registration. It then enters the existing GSTIN and its approval date under existing registrations.
3. The applicant completes the promoter, authorised signatory, principal place of business (the ISD office) and Aadhaar authentication tabs, as in any REG-01 application.
4. The applicant verifies the form by digital signature (mandatory for companies and LLPs under the form’s instructions), e-signature or EVC, and receives the ARN in FORM GST REG-02.
5. The application is then either approved electronically under rule 9A after the OTP check, or processed by the proper officer under rule 9.
6. On approval the certificate issues in FORM GST REG-06 with a new GSTIN for the ISD.

Verification, geocoding and physical verification

Because the application is under rule 8, rule 9 governs it if it is not approved under rule 9A. The officer has seven working days, or thirty days where the proviso to rule 9(1) applies. In that case the place of business is physically verified under rule 25 and the report and photographs are uploaded in FORM GST REG-30. The details are in Applying for GST Registration. REG-01 asks for the latitude and longitude of the principal place of business. The portal’s geocoding FAQ lists ISDs among the registrants to whom geocoding of the principal place of business applies.

What the registration obliges the ISD to do

Rule 39(1), substituted from 1 April 2025 by Notification No. 12/2024-Central Tax (brought into force by Notification No. 09/2025-Central Tax), sets the method. Among its conditions:

• Credit available for distribution in a month “shall be distributed in the same month”. The details are reported in FORM GSTR-6.
• Credit attributable to one recipient goes “only to that recipient”. Credit attributable to several, or to all, is split “pro rata on the basis of the turnover in a State or turnover in a Union territory” of the recipients, using the formula C1 = (t1 / T) x C.
• Eligible and ineligible credit are distributed separately.
• Integrated tax is distributed as integrated tax. Central and State tax go as central and State tax to a recipient in the ISD’s own State, and as integrated tax to a recipient elsewhere.
• Each distribution is made by an ISD invoice, and each reduction by an ISD credit note, containing the particulars in rule 54(1).

Under rule 39(1A), credit on reverse-charge services can reach the ISD from a registration of “the same PAN and State code as an Input Service Distributor”. That registration issues an invoice, credit note or debit note under rule 54(1A). Section 20(2) likewise speaks of tax “paid by a distinct person registered in the same State as the said Input Service Distributor”.

The return is FORM GSTR-6. Section 39(4) requires it “for every calendar month or part thereof … within thirteen days after the end of such month”. Rule 65 builds it from the auto-drafted FORM GSTR-6A. Rule 61 excludes an ISD from FORM GSTR-3B.

Distribution in breach of section 20 has consequences under section 21. The excess “shall be recovered from such recipients along with interest”, under section 73, 74 or 74A. Circular No. 71/45/2018-GST says recipients may pay voluntarily in FORM GST DRC-03, and that the ISD is exposed to penalty under section 122(1)(ix), which covers a person who “takes or distributes input tax credit in contravention of section 20”. How recipients then take the credit is covered in Input Tax Credit: the Conditions in Section 16(2).

Document checklist

The list follows REG-01. File limits are as stated in the portal’s user manual.

Document	Provided by	Format and limit (portal manual)
Photograph of each promoter, partner or director named in the form	Applicant	PDF or JPEG, 100 KB
Proof of appointment of authorised signatory (authorisation or board resolution, with acceptance, in the REG-01 format)	Business and signatory	PDF or JPEG, 1 MB
Photograph of authorised signatory	Signatory	100 KB
Proof of the ISD office as principal place of business: ownership document; or rent or lease agreement with the lessor’s ownership document; or consent letter with the consenter’s ownership document	Applicant, landlord or consenter	PDF or JPEG, 1 MB
Proof of constitution, where the form calls for it	Applicant	not stated
Existing GSTIN of the same PAN and its approval date	Applicant	entered in the form
Bank account proof, where bank details are given	Applicant	not stated

Forms involved

• FORM GST REG-01: the separate application, with “Input Service Distributor” as the reason.
• FORM GST REG-02: the acknowledgement with the ARN.
• FORM GST REG-03 and REG-04: the query and reply, if the application goes to an officer.
• FORM GST REG-30: the physical verification report, where applicable.
• FORM GST REG-06: the certificate.
• ISD invoice and ISD credit note under rule 54(1); and the invoice, credit note or debit note under rule 54(1A) for reverse-charge credit.
• FORM GSTR-6A and FORM GSTR-6: the monthly return.
• FORM GST DRC-03: voluntary payment by recipients of excess credit.

Declarations, consents and authorisations

Prescribed by REG-01:

• the Aadhaar consent at item 26
• the verification at item 27
• the authorisation of each signatory, with the signatory’s acceptance

Required by the REG-01 document list:

• a consent letter for premises neither owned nor rented
• for rented premises without an agreement, “an affidavit to that effect” with proof of possession

Required by the portal in practice, as its manual describes: OTP confirmation by the primary authorised signatory of an existing GSTIN of the same PAN, where the application is considered under rule 9A.

The procedure in summary

1. Identify each office that receives invoices for input services, including reverse-charge services, for or on behalf of other registrations of the same PAN.
2. For each such office, file a separate REG-01 selecting “Input Service Distributor only”, citing an existing GSTIN of the same PAN and its approval date.
3. Complete Aadhaar authentication and verify the form. Confirm the OTP sent to the existing GSTIN’s primary authorised signatory if the portal requests it.
4. Await electronic approval under rule 9A, or processing under rule 9, with physical verification if the proviso applies.
5. Once REG-06 issues, distribute each month’s credit in that month by ISD invoices under rule 39.
6. File GSTR-6 by the thirteenth of the following month.

The next guide turns from the special registrations to an option open to small regular taxpayers: Opting In and Out of the Composition Scheme.