Manner of distribution of credit by Input Service Distributor
Section 20, CGST Act
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An Input Service Distributor (ISD) is an office that receives invoices for common input services used across multiple GST registrations of the same PAN and distributes that credit to them. Since 1 April 2025 ISD registration is MANDATORY for such common-service credit (including reverse-charge services), no longer optional.
What this means in practice
The parts that actually decide cases — the things a practitioner checks first.
ISD registration became MANDATORY from 01-04-2025 (Finance (No.8) Act 2024 read with the amended s.2(61) and s.20). Common input services can no longer be distributed by a cross-charge invoice instead of an ISD.
Since 01-04-2025 the ISD also distributes credit on reverse-charge services received for common use – the ISD raises a self-invoice under the amended Rule 39.
Distribution is monthly in FORM GSTR-6 by the thirteenth, in the ratio of the recipients’ turnover in the previous financial year, keeping central, State, integrated and cess credit separate.
ISD and cross-charge are different things: an ISD distributes credit on THIRD-PARTY invoices; cross-charge is a supply of service by one distinct person to another and carries its own tax. A head office doing both needs two mechanisms.
Questions people actually ask
Real questions we get on this provision, answered straight.
Our head office receives one audit-fee invoice covering all our branches. How do we pass the credit on?+
Through an Input Service Distributor registration – mandatory since 1 April 2025 for common input services. The head office takes a separate ISD registration, receives the invoice in that GSTIN, and distributes the credit monthly in GSTR-6 in the previous year’s turnover ratio. Cross-charging it as a service is no longer the correct route for third-party input services.
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The exact words of the law
1,690 characters, uneditedReproduced from the CBIC text. We explain it above — but you should always be able to read it yourself.
Read the full provision+
(1) 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 2 [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.
(2) The Input Service Distributor shall distribute the credit of central tax or integrated tax charged on invoices received by him, including the credit of central or integrated tax in respect of services subject to levy of tax under sub-section
(3) or sub-section
(4) of section 9 2 [of this Act or under sub-section
(3) or sub-section
(4) of section 5 of the Integrated Goods and Services Tax Act, 2017,] paid by a distinct person registered in the same State as the said Input Service Distributor, in such manner, within such time and subject to such restrictions and conditions as may be prescribed.
(3) The credit of central tax shall be distributed as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit, in such manner as may be prescribed.] 1. Substituted (w.e.f. 01.04.2025) by s. 12 of The Finance (No. 8) Act, 2024. 2. Inserted (w.e.f. 01.04.2025) by s. 125 of The Finance (No. 7) Act, 2025.
High Court cases on this section
Judgments in our index that cite this provision. Being listed does not make a case good law — it may have been appealed or distinguished since. Read it before relying on it.
ANKIT GOYAL v. DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE, ZONAL UNIT, LUDHIANA
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SANJEEV KUMAR ALIAS SANJEEV GOYAL v. DIRECTORATE GENERAL OF GOODS AND SERVICES TAX INTELLIGENCE, ZONAL UNIT LUDHIANA
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KAMLESH KUMAR v. STATE TAX OFFICER
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STATE BANK OF INDIA v. THE COMMISSIONER, CENTRAL GOODS AND SERVICE TAX AND CENTRAL EXCISE, SLG COMMISSIONERSTE AND ORS.
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HARSH v. DIRECTORATE GENERAL OF GST INTELLIGENCE, CR BUILDING AND ANOTHER
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KAMALPREET SINGH v. STATE(DIRECTORATE GENERAL OF GST INTELLIGENCEW) CHD
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GU Shipping India Pvt Ltd v. The Assistant Commissioner of CGST and Central Excise
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RATTAN KUMAR GARG v. DIRECTORATE GENERAL OF GST INTELLIGENCE
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37 more on record. Search all GST case law →
What changed, and when
The amendment trail, newest first — because the version that applies to your case depends on the period.
2017-07-01 · Commenced
Provision as originally enacted in the CGST Act, 2017 (Act 12 of 2017) and brought into force w.e.f. 01-07-2017.
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Where this comes from
Text reproduced from the Central Board of Indirect Taxes and Customs, as available on 2026-09-05. The explanation and practice notes above are GSTZone’s own, written for this hub. If you spot anything out of date, tell us and we’ll fix it — this hub is checked daily against CBIC.
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