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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Input Tax Credit and Computation of GST Liability

Under section 20(3) of the CGST Act, 2017, how may an Input Service Distributor distribute the credit?

Central tax credit can be distributed as central tax or integrated tax, and integrated tax credit as integrated tax or central tax. Section 20(3) allows this through a document stating the credit amount, in the manner prescribed. Restricting each to its own head is incorrect.

  1. ACentral tax credit only as central tax, and integrated tax credit only as integrated tax
  2. BCentral tax as central tax or integrated tax, and integrated tax as integrated tax or central taxCorrect
  3. COnly as State tax in the recipient's State
  4. DCentral tax credit only as integrated tax, never as central tax

Explanation

Section 20(3) states that credit of central tax is distributed as central tax or integrated tax, and integrated tax as integrated tax or central tax, by issuing a document containing the credit amount. The first option is too narrow because it denies the cross-conversion. The others are not provided in the text.

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