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

Which statement about the credit an Input Service Distributor distributes under section 20(2) of the CGST Act, 2017 (from 1 April 2025) is correct?

The ISD's distributable credit includes central or integrated tax on reverse charge services under section 9(3) or 9(4) CGST or section 5(3) or 5(4) IGST, paid by a distinct person registered in the same State as the ISD. It concerns input services, not goods.

  1. AIt covers only invoices for goods received by the ISD
  2. BIt excludes any tax paid on reverse charge
  3. CIt includes credit on reverse charge services under section 9(3) or 9(4) of the CGST Act or section 5(3) or 5(4) of the IGST Act, paid by a distinct person registered in the same State as the ISDCorrect
  4. DIt covers State tax credit on inter-State invoices only

Explanation

Section 20(2) lets the ISD distribute central or integrated tax charged on invoices received, including credit on reverse charge services under the stated provisions, paid by a distinct person registered in the same State as the ISD. It concerns input services, not goods, so the first option fails. The second option contradicts the text.

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