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CA Final · Indirect Tax Laws · Input Tax Credit

Sahyadri Textiles Ltd, an Input Service Distributor (ISD) located in Maharashtra, receives an input service attributable only to its Pune branch, which has the same PAN as the ISD. Under Rule 39 of the CGST Rules, 2017, how must the credit of tax paid on this service be distributed?

The credit must be distributed only to the Pune branch. Where an input service is attributable to a single recipient of credit, the ISD distributes the entire credit to that recipient alone, and turnover-based pro rata distribution does not arise.

  1. APro rata among all branches having the same PAN on the basis of turnover
  2. BOnly to the Pune branch, being the recipient to whom the service is attributableCorrect
  3. CEqually among all branches that are operational in the current year
  4. DRetained by the ISD and not distributed until the end of the financial year

Explanation

Rule 39(1)(c) states that credit of tax paid on input services attributable to a recipient of credit is distributed only to that recipient. Pro rata distribution on turnover applies only when the service is attributable to more than one recipient or to all recipients, so the pro rata option is wrong.

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