Compulsory ISD Registration Under GST 1st April 2025

Introduction

Effective April 1, 2025, a new GST rule mandates that businesses with multiple GSTINs under the same PAN must register as an Input Service Distributor (ISD). This amendment aims to streamline the distribution of Input Tax Credit (ITC) and strengthen compliance. In this article, we’ll cover the updated ISD provision, the registration process, compliance obligations, and essential considerations for businesses.

What's New in the GST Update?

Effective April 1, 2025, GST-registered businesses with multiple GSTINs under the same PAN will be required to register as an Input Service Distributor (ISD).

Previously optional, ISD registration is now compulsory under this amendment. The objective is to streamline Input Tax Credit (ITC) distribution, ensure uniform compliance, and enable centralized credit management across multiple branches or locations.

Why This Matters: Key Consequences of Non-Compliance

Failing to register as an ISD can lead to several business risks:

Penalties & Interest
Incorrect or unregistered ITC distribution may lead to penalties and interest recovery under Section 21 of the GST Act.
GST Audits & Scrutiny
Mismatches in ITC claims can trigger audits and investigations, increasing compliance pressure.
ITC Reversal
Improper credit allocation may result in reversal of ITC, affecting cash flow and working capital.
Tax Notices
Wrongful claims by the head office may attract tax notices and financial liabilities.
Operational Disruptions
Without proper ISD registration, businesses risk inefficient credit allocation and internal disputes across branches.

ISD Registration Process: Step-by-Step

An Input Service Distributor is a registered entity that receives invoices for services used across various units and redistributes the eligible ITC.

How to Register:

Apply through the GST REG-01 form.
In Serial No. 14, select the option for ISD registration.
Once registered, you can start distributing ITC to relevant GSTINs.

ISD Compliance & Returns

Monthly Filing:
File GSTR-6 by the 13th of the following month to report ITC distribution.
Auto-Population:
Distributed ITC appears in GSTR-6A for recipient branches.
Branch Reporting:
Recipients must report received ITC in GSTR-3B.
Annual Return:
ISDs are exempt from GSTR-9, simplifying compliance obligations

Key Takeaway: What Businesses Should Do Now

With ISD (Input Service Distributor) registration becoming mandatory from April 1, 2025, businesses must act promptly to ensure compliance:

Assess Eligibility: Determine if your organization qualifies as an ISD and complete the registration process without delay.
Set Up Tracking Systems: Establish robust systems to monitor Input Tax Credit (ITC) and allocate it correctly to relevant branches or units.
Ensure Timely Filings: File GSTR-6 returns accurately and on time each month to prevent late fees and avoid ITC mismatches.
Train Internal Teams: Educate relevant personnel on ISD procedures, documentation standards, and ongoing compliance requirements.

Early compliance brings key benefits:

Streamlined ITC distribution across multiple locations.
Reduced risk of legal issues or GST-related notices.
Optimal utilization of input tax credits through accurate allocation

About the Author

Manisha
Manisha is our expert content writer who specialises in business registration, tax regulations, trademark laws, and company compliance. His insightful articles deliver clear and actionable advice, helping businesses easily navigate and overcome complex legal and regulatory challenges

June 26, 2025