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CMA Intermediate · Direct and Indirect Taxation · Input Tax Credit

Under Rule 39 of the CGST Rules, 2017, an Input Service Distributor (ISD) received eligible input tax credit of Rs 60,000 on an input service that is attributable to only one recipient, Unit A, having the same PAN as the ISD. How must this credit be distributed?

The whole Rs 60,000 goes to Unit A. Under Rule 39(1)(c), credit on input services attributable to one recipient is distributed only to that recipient, so turnover-based pro rata sharing among other units does not apply.

  1. AEntirely to Unit A onlyCorrect
  2. BPro rata among all units having the same PAN on the basis of turnover
  3. CEqually among all units having the same PAN
  4. DRetained by the ISD and distributed in the following financial year

Explanation

Rule 39(1)(c) provides that credit of tax paid on input services attributable to a recipient of credit is distributed only to that recipient. Since the service is attributable to Unit A alone, the entire Rs 60,000 goes to Unit A. Pro rata distribution applies only when the service is attributable to more than one recipient, or to all recipients.

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