A textile exporter in Surat has one GST registration for its head office and three more for factories in Ahmedabad, Vapi and Vadodara. The head office pays the annual bill for the company's accounting software, ₹6 lakh plus GST, and until now, that input tax credit just sat with the head office, doing nothing. From this year, that's not allowed anymore. If you're running a business with more than one GST registration on the same PAN and a head office that pays for shared services, you need to know about ISD, and you probably need to register for it.

What Actually Changed

Input Service Distributor, or ISD, has existed in GST law since 2017. But it was optional. Businesses could either register as an ISD and formally distribute credit to their branches, or simply "cross-charge" the cost between distinct persons and achieve roughly the same result. That choice is gone. Following the 2024 amendment to Section 24 of the CGST Act, which is now fully in force, any office that receives tax invoices for services used by more than one branch (technically, "distinct persons") must register as an ISD. It doesn't matter what your turnover is. Section 24(viii) makes ISD registration compulsory, full stop, once the trigger condition is met.

Who This Actually Applies To

If your business operates from a single GST registration, none of this touches you. It matters the moment your head office (or any branch, really) receives an invoice for something that benefits multiple registrations under the same PAN — legal fees, a software subscription, an audit fee, insurance, a marketing retainer, cloud hosting. Common examples we see with clients: a company with a Junagadh head office and a Rajkot branch sharing one CA firm's retainer, or a manufacturer with a factory in one state and a sales office in another, both using the same courier contract. If that sounds like your setup, you likely need ISD registration even if you never asked for one before.

How the Credit Actually Moves

Once registered, the ISD (usually the head office) has to file GSTR-6 by the 13th of the following month — this is separate from your regular GSTR-1 and GSTR-3B filings, so it's an extra return, not a replacement. Every invoice issued for distributing credit has to say, in as many words, that it's an "ISD invoice for distribution of input tax credit," per Rule 54(1) of the CGST Rules. Credit gets split across branches based on their turnover in the previous financial year, not on a guess or a convenient round number. One thing that trips people up: ISD only covers input services. If you're buying machinery, raw materials, or any goods for a branch, that credit doesn't flow through ISD — it has to be claimed directly by whichever registration actually received the goods.

Don't Confuse This With Cross-Charge

Cross-charge hasn't disappeared, and this is where a lot of businesses get their planning wrong. If your head office HR team is doing payroll work that benefits three branches, that's an internally generated cost, and it still goes through cross-charge with a tax invoice and GST paid between the distinct persons. ISD is specifically for third-party services that come in as a single invoice from an external vendor. Run both mechanisms side by side and you're fine. Try to force everything through one route and you'll either lose credit or attract questions in your next GST audit.

The Cost of Getting This Wrong

Since this is a mandatory registration requirement now, not registering when you meet the criteria isn't a minor paperwork lapse — it's non-compliance under Section 24. Beyond the registration itself, if credit isn't distributed through the proper ISD mechanism, your branches can lose the ability to claim it at all, which for a mid-sized business easily runs into lakhs of rupees a year sitting unclaimed. And because GSTR-6 is a monthly return, once you're registered, missing it repeatedly creates the same red flags as a missed GSTR-3B.

What people usually get wrong here isn't the concept, it's the timing. Businesses tend to register for ISD only after a GST officer flags it during a scrutiny, by which point they've already lost several months of distributable credit that can't be claimed retrospectively. If your business has multiple GST registrations under one PAN, it's worth checking this now rather than waiting for a notice.

How Gadhia Associate Can Help

We help businesses across Gujarat figure out whether they actually need ISD registration, get it done correctly, and set up the monthly GSTR-6 filing and invoicing process so credit flows to the right branches without disputes later. If you have more than one GST registration and share costs across them, talk to us before your next tax audit does the discovering for you. Reach out to Gadhia Associate for a quick review of your ISD position.