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CA Final · Indirect Tax Laws · Input Tax Credit

Sahyadri Foods Ltd has its head office in Pune, Maharashtra, registered as an Input Service Distributor (ISD). Its units in Pune and Nashik (both Maharashtra) and in Indore (Madhya Pradesh) have the same PAN. In the current month the ISD receives an input service invoice carrying IGST, which is attributable only to the Indore unit. Under rule 39 of the CGST Rules, 2017, how should this credit be distributed?

The credit goes only to the Indore unit, as integrated tax credit. Rule 39 requires credit attributable to a single recipient to be distributed only to that recipient, and credit of integrated tax is always distributed as integrated tax credit.

  1. AAs integrated tax credit to the Indore unit onlyCorrect
  2. BAs central tax and State tax credit to the Indore unit only
  3. CPro rata among Pune, Nashik and Indore units on the basis of turnover
  4. DAs integrated tax credit to the Pune head office, which then transfers it

Explanation

Credit of tax on an input service attributable to one recipient is distributed only to that recipient (clause c). Integrated tax credit is distributed as integrated tax credit to every recipient (clause i). So the Indore unit alone receives IGST credit. Pro rata distribution applies only where the service is attributable to more than one recipient.

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