GST ISD Rules FY 2026-27: Rule 39, IGST Distribution & 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.
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.
Frequently Asked Questions
What should I know about 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 mul
What should I know about 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.
What should I know about 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.
What should I know about 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 IS
What should I know about 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.
What should I know about 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.
What should I know about 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.
What should I know about 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.
What should I know about 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.
What should I know about 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
What should I know about 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.
What should I know about 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 corr
What should I know about 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 ca
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