goods and service tax

Published on 4 April 2025

ISD Registration Mandatory from April 2025 for Multi-GST Firms

If you’re running a business in India and have branches across different states, there’s something big you need to get on top of before April 1, 2025. It’s called the Input Service Distributor—or ISD—mechanism. And guess what? From that date onward, registering as an ISD is no longer optional. It’s mandatory. No debates.

So, What Is This ISD Thing?

Imagine your company’s head office receiving an invoice for legal consultation that was actually for the benefit of all branches. How do you split that tax credit fairly across branches in Delhi, Haryana, and Punjab? That’s where ISD comes in.

In simple terms, the ISD is just one registered office (usually the HQ) that collects invoices for services used by multiple units under the same PAN, and then proportionately distributes the input tax credit (ITC) to each one. It’s about fair play and proper records.

Why Is the Government Forcing It Now?

Through Notification No. 16/2024-Central Tax (dated August 6, 2024), the government said: enough with the loopholes. From April 2025, if your business has more than one GST registration under the same PAN and receives invoices for common services, you must register under ISD.

The logic is pretty clear:

  • Uniformity across the board
  • Better tracking
  • Avoiding misuse
  • Smoother GST audits

What’s in It for You?

It might seem like extra work, but this system actually helps you manage input tax credits in a clean, compliant, and logical way. Here’s what you get:

  • One place to handle all service-related tax credits
  • No confusion—credits are split based on how much revenue each unit pulls in
  • Reverse charge services also fall under ISD now
  • You’ll be filing GSTR-6 monthly—yes, that means more compliance, but also more clarity

What Services Qualify?

There’s no exhaustive list, but typically, these are the types of services that would fall under the ISD scope:

  • Legal, tax, or audit advice
  • Advertising and digital campaigns
  • Software and cloud subscriptions
  • HR and recruitment
  • Board-level consulting
  • Banking, insurance
  • Even utility and maintenance services

If it’s billed to the head office and benefits everyone, it probably qualifies.

How the Credit Gets Shared (Example Inside)

You’ve got ₹1 crore in ITC sitting at the head office for a software service. Last year’s turnover looked like this:

  • Delhi: ₹30 crore
  • Haryana: ₹20 crore
  • Punjab: ₹10 crore

Now apply the formula: Credit to Branch = (Turnover of that Branch / Total Turnover) x Total ITC

So:

  • Delhi gets ₹50 lakh
  • Haryana gets ₹33.33 lakh
  • Punjab gets ₹16.67 lakh

All fair and square. Just make sure your numbers are backed up with proper records.

What You Have to Do (Yes, You Have To)

  1. Register through GST REG-01 and tick the box for ISD (it’s in Serial No. 14).

  2. File GSTR-6 by the 13th of every following month.

  3. Follow proper tax distribution:

    • Within the same state: break it into CGST and SGST
    • Different state: send it out as IGST

  4. Keep everything on file—bills, branch-wise turnover details, distribution logs

If You Slip Up?

Not pretty. Mistakes can hurt:

  • Gave out too much credit? You’ll have to reverse and repay it—with interest
  • Get caught under Section 74A? You could be looking at 25% of the tax amount or ₹10,000 as penalty
  • Filed GSTR-6 late? ₹50 every day it’s delayed

Best Practices That Can Save You

  • Don’t rely on Excel sheets—get GST software that automates this whole thing
  • Audit monthly—don’t wait for a tax officer to point out errors
  • Train your finance team well in advance
  • Treat deadlines seriously

Quick Answers to the Obvious Questions

Is this mandatory for everyone? If you have more than one GSTIN under the same PAN and get common service invoices, yes.

Can I use ISD for goods? No. Only services.

What if one branch isn’t registered? You can still allocate ITC to it.

How do I calculate turnover? Use last year’s figures. If not available, take the latest quarter.

Final Word

This isn’t just about checking a compliance box. The new ISD rule is here to help you streamline how you deal with input tax credit. And if you’re not ready by April 1, 2025, it’s not going to be a gentle wake-up call—it’ll be a penalty-laden mess.

So, sort out your registration, clean up your records, and make sure your ITC distribution process is locked in. Do it now. Your future self will thank you for it.