GST ISD Rules FY 2026-27: Rule 39, IGST Distribution, Same-State vs Other-State & GSTR-6
Last reviewed: 25 August 2026.
Answer first: If a Delhi ISD receives an IGST invoice and distributes that credit to another Delhi branch, the credit is distributed as IGST. The same is true when IGST credit is distributed to a branch in another State: it remains IGST. The same-State/other-State conversion rule mainly affects CGST and SGST/UTGST credit.
FY 2026-27 applicability box
| Topic | Position |
|---|---|
| Mechanism | Input Service Distributor (ISD) |
| Main law | Section 20 of CGST Act and Rule 39 of CGST Rules |
| Return | Form GSTR-6 |
| Normal due date | 13th of the succeeding month unless extended |
| ISD registration | Separate registration is required |
| Core purpose | Distribute ITC of common/input services to eligible recipient GST registrations |
What is an Input Service Distributor?
An Input Service Distributor is an office of a business that receives invoices for input services used by one or more registrations of the same legal entity and distributes the corresponding input tax credit to the appropriate recipient units. Typical examples are head-office invoices for audit, software, legal, advertising, consultancy, cloud, telecom or other centrally procured services that benefit branches in multiple States.
ISD is not a method for shifting credit arbitrarily. The underlying service must be attributable to the recipient unit or units, and distribution must follow the statutory allocation rules.
Legal framework
| Provision | Practical role |
|---|---|
| Section 20, CGST Act | Sets conditions for distribution of credit by ISD. |
| Rule 39, CGST Rules | Prescribes the distribution method, eligible/ineligible split, tax-head treatment and allocation mechanics. |
| Rule 65 | Prescribes filing of Form GSTR-6. |
| ISD invoice / credit note rules | Require prescribed particulars on documents used to distribute or reduce credit. |
The most important tax-head rule
| Credit available with ISD | Recipient in same State as ISD | Recipient in another State |
|---|---|---|
| IGST | IGST | IGST |
| CGST | CGST | Distributed as IGST equal to the qualifying CGST + SGST/UTGST amount |
| SGST/UTGST | SGST/UTGST |
Key memory rule: IGST stays IGST. CGST + SGST remain their respective heads for a same-State recipient, but for a recipient in another State they are distributed as IGST.
Your Delhi example
Assume the ISD registration is in Delhi and a vendor located outside Delhi issues an invoice charging IGST of ₹18,000 for a service attributable to a Delhi branch.
| Step | Treatment |
|---|---|
| Vendor invoice received by Delhi ISD | IGST ITC ₹18,000 available for distribution, subject to eligibility. |
| Recipient branch | Another Delhi GST registration of the same legal entity. |
| Tax head distributed | IGST ₹18,000. |
The fact that both the ISD and recipient unit are in Delhi does not convert incoming IGST credit into CGST/SGST. Rule 39 separately requires IGST credit to be distributed as IGST.
Worked example 2: Delhi ISD to Maharashtra branch
Delhi ISD holds IGST credit of ₹30,000 attributable exclusively to the Maharashtra branch. The full ₹30,000 is distributed as IGST to Maharashtra, subject to the normal eligibility conditions.
Worked example 3: Delhi CGST/SGST credit to Delhi branch
Suppose a Delhi supplier invoices the Delhi ISD with CGST ₹9,000 and SGST ₹9,000 for a service attributable to another Delhi GST registration. The ISD distributes ₹9,000 as CGST and ₹9,000 as SGST to that Delhi recipient.
Worked example 4: Delhi CGST/SGST credit to another-State branch
If the same qualifying CGST ₹9,000 and SGST ₹9,000 credit is attributable to a Maharashtra recipient, the distribution is made as IGST of ₹18,000 to that recipient, following the Rule 39 interstate-recipient mechanism.
Exclusive service vs common service
| Situation | Distribution principle |
|---|---|
| Service attributable only to one unit | Distribute only to that recipient. |
| Service attributable to two or more units | Distribute among those attributable recipients on the prescribed turnover basis. |
| Service attributable to all recipients | Distribute across all relevant recipients on the prescribed turnover basis. |
Eligible and ineligible ITC must be separated
Rule 39 requires eligible and ineligible credit to be distributed separately. A blocked or otherwise ineligible credit does not become eligible merely because it is routed through ISD. The recipient should receive the distributed amount with its eligibility character properly identified and account for it accordingly.
GSTR-6 filing workflow
- Review inward service invoices received by the ISD.
- Identify the recipient unit or attributable group of units.
- Separate eligible and ineligible ITC.
- Apply the turnover allocation where a service benefits multiple recipients.
- Determine the correct distributed tax head under Rule 39.
- Issue ISD invoice/credit note as applicable.
- Enter/review inward credit and distribution details in GSTR-6.
- File GSTR-6 by the statutory due date, normally the 13th of the next month unless extended.
- Reconcile distributed credit with recipient ledgers.
Accounting and ERP treatment
A strong ERP process should maintain a separate ISD GSTIN, vendor-invoice tagging, recipient GSTIN mapping, service-attribution logic, eligible/ineligible flag, allocation key, ISD document number and monthly GSTR-6 reconciliation. Common-service invoices should not be parked indefinitely at head office when the credit economically belongs to branches.
Month-end compliance checklist
- Confirm all central input-service invoices received in the month.
- Check that the supplier GSTIN and invoice tax heads are correct.
- Identify exclusive vs common services.
- Map each recipient GSTIN.
- Update turnover base used for common-credit allocation.
- Separate blocked/ineligible credit.
- Reconcile ISD invoices and credit notes.
- Check GSTR-6 before filing.
- Confirm recipient units have booked the distributed credit correctly.
Risk matrix
| Risk | Impact | Control |
|---|---|---|
| IGST wrongly split into CGST/SGST for same-State unit | Incorrect tax-head distribution | Remember: IGST is distributed as IGST. |
| Common credit given entirely to one branch | Excess credit at one GSTIN | Use attribution/turnover allocation. |
| Blocked credit distributed as eligible | Wrong ITC availment | Maintain eligible/ineligible flags. |
| Missing GSTR-6 filing | Credit flow and compliance delay | Monthly closing calendar before the 13th. |
| Using normal GST registration instead of ISD workflow | Documentation and audit exposure | Maintain separate ISD registration where required. |
Common mistakes
- Assuming same-State recipient means every credit must become CGST/SGST.
- Ignoring the separate rule for IGST credit.
- Allocating common services without a defensible attribution/turnover basis.
- Distributing a credit amount greater than the credit available.
- Mixing eligible and blocked credits.
- Skipping recipient-wise reconciliation after filing GSTR-6.
Frequently asked questions
If Delhi ISD receives an IGST invoice, what is distributed to another Delhi branch?
IGST is distributed as IGST, subject to eligibility and attribution.
What if the recipient branch is in another State?
IGST credit is still distributed as IGST.
How is CGST distributed to a same-State recipient?
It is distributed as CGST.
How is SGST distributed to a same-State recipient?
It is distributed as SGST/UTGST, as applicable.
What happens to CGST and SGST for an other-State recipient?
The qualifying amounts are distributed as IGST under the interstate-recipient rule.
What is the normal GSTR-6 due date?
The normal due date is the 13th of the succeeding month unless officially extended.
Can ISD distribute more credit than available?
No. Distribution cannot exceed available credit.
Can blocked ITC become eligible through ISD?
No. Eligible and ineligible credits are separately identified and distributed.
How is a service attributable only to one branch handled?
The credit should be distributed only to that recipient.
How is common-service credit divided?
It is distributed among attributable recipients using the prescribed turnover basis.
Does an ISD need separate GST registration?
Yes, ISD registration is separate from the normal GST registration.
What document is issued to distribute credit?
An ISD invoice containing prescribed particulars is used; an ISD credit note is used where distributed credit must be reduced.
Is GSTR-6 a monthly return?
Yes, ISD filing is monthly.
Can an ISD use the mechanism for goods?
The ISD mechanism concerns input-service credit, not distribution of input-goods credit.
Should the finance team reconcile recipient ledgers?
Yes. Recipient-wise reconciliation is a key month-end control.
Does Rule 39 require same-month distribution?
The rule framework requires credit available for distribution in a month to be distributed in that month, subject to the current statutory text and portal process.
Can a company choose any turnover key it prefers?
No. Use the turnover basis and relevant-period principles prescribed by Section 20/Rule 39.
What is the safest ERP control for ISD?
Tag each central service invoice to recipient GSTINs, eligibility and allocation basis before GSTR-6 preparation.
Official references
- CGST Act – Section 20 framework
- CBIC – Input Tax Credit Rules / Rule 39
- GST Portal – GSTR-6 user guide
- CBIC – ISD invoice particulars
This article explains the general statutory workflow. For unusual cross-charge/ISD, RCM, SEZ or restructuring facts, verify the latest notifications/circulars and transaction documents before filing.
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