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CA Final · Indirect Tax Laws · Input Tax Credit

Sundaram Textiles Ltd. has an Input Service Distributor (ISD) registration in Chennai. In a month it receives an advertising service whose credit is attributable solely to its Coimbatore unit, which has the same PAN as the ISD. Under Rule 39 of the CGST Rules, 2017, how must the ISD distribute this credit?

The credit must go only to the Coimbatore unit. Rule 39(1)(c) provides that credit on input services attributable to a single recipient is distributed only to that recipient. Turnover-based pro rata sharing applies only when the service is attributable to several recipients or to all recipients.

  1. APro rata among all units having the same PAN, on the basis of turnover
  2. BOnly to the Coimbatore unit, as the service is attributable to that recipient aloneCorrect
  3. COnly to the Chennai unit, being the State where the ISD is located
  4. DRetain it with the ISD and distribute it in the next financial year

Explanation

Clause (c) of Rule 39(1) says credit of tax paid on input services attributable to a recipient of credit is distributed only to that recipient. Turnover-based pro rata distribution applies only where the service is attributable to more than one recipient or to all recipients. Distribution is also required in the same month under clause (a), so deferral is wrong.

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