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CMA Final · Indirect Tax Laws and Practice · Input Tax Credit

Under Rule 39 of the CGST Rules, 2017 (as amended w.e.f. 1 April 2025), an Input Service Distributor (ISD) receives credit on an input service attributable to only one recipient of credit. How must this credit be distributed?

Credit on an input service attributable to a single recipient must be distributed only to that recipient. Turnover-based pro rata distribution applies only when the service relates to several recipients or all recipients, and the credit must be distributed in the same month it is available.

  1. APro rata on the basis of turnover among all recipients having the same PAN
  2. BOnly to that recipient to whom the input service is attributableCorrect
  3. CEqually among all recipients located in the same State as the ISD
  4. DRetained with the ISD and carried forward until the year-end

Explanation

Clause (c) of sub-rule (1) states that credit of tax paid on input services attributable to a recipient of credit is distributed only to that recipient. Pro rata turnover distribution applies only where the service is attributable to more than one recipient or to all recipients. Carry forward is wrong because clause (a) requires distribution in the same month.

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