Mandatory ISD Registration For Multi-State Companies By April 2025: CBIC

Companies operating in multiple states and distributing common input tax credit (ITC) with branch offices will need to register as Input Service Distributors (ISD) with GST authorities by 1 April 2025. This requirement stems from an amendment to the Goods and Services Tax (GST) law introduced through the Finance Bill, 2024, in February.

The Central Board of Indirect Taxes and Customs (CBIC) has now set 1 April 2025, as the deadline for all companies with multi-state branches to comply with this new registration requirement.

The amendment mandates that businesses with multi-state GST registrations must register as ISD to allocate ITC for services available across their branches. The mechanism for sharing ITC is outlined in GST rules, with common ITC apportioned based on the turnover ratio of different branches under the same PAN.

As per industry experts, "This move represents an effort to enhance operational transparency and will help taxpayers accurately distribute tax credit on common invoices across states in an appropriate manner."

GST-exempt sectors, including alcohol, petroleum, education, real estate, and health, will need to adjust their business processes to ensure effective management and distribution of tax credits.

This initiative aims to streamline tax credit distribution and improve compliance among businesses with multi-state operations, ultimately fostering a more transparent and efficient GST framework in India.