Input Service Distributor (ISD)
An Input Service Distributor (ISD) is an office of a business that receives tax invoices for common input services and distributes the resulting ITC to its other registrations under the same PAN.
An ISD is a single registration a business uses to receive invoices for shared services — audit, software, advertising — and then apportion the ITC to the branches that used them. Under the amended Section 20, the ISD mechanism became mandatory from 1 April 2025 for distributing common input-service credit across GSTINs.
Large businesses often pay for services centrally — a group software licence, a national ad campaign — but consume them across multiple state registrations. The ISD, registered separately under Section 20 of the CGST Act, receives those invoices and issues ISD invoices distributing the ITC to each recipient GSTIN in the correct proportion.
Crucially, from 1 April 2025 the ISD route is mandatory (as of July 2026) for distributing common input-service credit — the earlier option to cross-charge instead is gone for such credits. From the same date, the amended definition also expressly covers input services taxed under reverse charge (Section 9(3)/(4)). Reconciliation must confirm that credit received centrally equals credit distributed. Credit received but not fully passed on stays stranded at the ISD and is a common audit finding.
The Recoup angle: Recoup traces each ISD invoice from receipt to distribution so common credit is apportioned completely and correctly.