The Government of India has made a lot of changes in the rules of Goods and Services Tax. Under this, the Input Service Distributor System is going to be implemented from April 1, 2025. Earlier, businessmen had two options to allocate common ITC to their other GST registrations.
The Government of India has made a lot of changes in the rules of Goods and Services Tax. Under this, the Input Service Distributor System is going to be implemented from April 1, 2025. The main objective of this system is to ensure proper distribution of tax revenue among the states. With its help, state governments will collect appropriate amount of tax on shared services being provided at one place.
The Central GST Act has been amended under the Finance Act of 2024 to implement the ISD mechanism. This mechanism facilitates businesses that operate in multiple states. Under this, businesses can centralize invoices for common input services at one of their headquarters. This enables equitable distribution of input tax credit among branches that use shared services.
Benefit of input tax credit
Input tax credit is the tax that businesses pay on their purchases. It can be deducted from the output tax, thereby reducing the total GST liability of the business. Under the new rules, it will be mandatory to use the ISD system so that ITC is distributed correctly.
What are the new rules
Earlier, businessmen had two options to allocate common ITC to their other GST registrations. These two options were ISD mechanism or cross-charge method, but now from April 1, 2025, ITC will not be given for the recipient location if ISD is not used. If ITC is wrongly distributed, the tax authority recovers the amount along with interest. Along with this, a penalty will also be imposed for irregular distribution, which will be more than the amount of ITC or Rs 10,000.
GST System
It is believed that this change is another big step towards making the GST system more organized. The ISD system will not only distribute tax revenue among the states, but will also help businesses manage their tax liabilities better. This step will prove to be very good for preventing tax evasion and bringing transparency in the system.
Related Articles:-
US issued a warning for immigrants, all such people will be deported despite having visa
UPI services for THESE numbers will not be available from April 1. Details here
New Update on 8th Pay Commission by Govt…! DA will be merged with basic salary?
