Section 20 of GST Act: Distribution of credit by Input Service Distributor

Amended and updated notes on section 20 of CGST Act, 2017. Provisions and rules related to manner of distribution of credit by Input Service Distributor.

Amended and updated notes on section 20 of CGST Act, 2017. Detail discussion on provisions and rules related to manner of distribution of credit by Input Service Distributor.

Chapter V (Sections 1621) of the Central Goods and Services Tax Act, 2017 deals with the provisions related to input tax credit. Section 20 of CGST 2017 provides for manner of distribution of credit by Input Service Distributor.

Recently, we have discussed in detail section 19 (Taking input tax credit in respect of inputs and capital goods sent for job work) of CGST Act 2017. Today, we learn the provisions of section 20 of Central GST Act 2017.

Section 20 of the Central Goods and Services Tax Act, 2017 has been notified by the Ministry of Finance vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017. This notification was come into force from 1st July, 2017 i.e. the commencement date of section 20 is 1-7-2017.

Name of ActThe Central Goods and Services Tax Act 2017
Enacted byParliament of India
Administered byCentral Board of Indirect Taxes & Customs
Governing bodyGST Council
Number of Chapters21
Number of Sections174
You are reading:
Chapter No.V
Chapter NameInput Tax Credit
Section No.20
Section NameManner of distribution of credit by Input Service Distributor
Updated 2024 EditionGST Law Book PDF

Relevant Rules and Forms for Section 20:

  • Rule 39: Procedure for distribution of input tax credit by Input Service Distributor
  • Rule 54: Tax invoice in special cases

Section 20 of Central GST – Manner of distribution of credit by Input Service Distributor1

Section 20 of CGST Act 2017 shall come into force on 01.07.2017 vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017.

Section 20(1) of CGST Act

Section 20(1): The Input Service Distributor shall distribute the credit of central tax as central tax or integrated tax and integrated tax as integrated tax or central tax, by way of issue of a document containing the amount of input tax credit being distributed in such manner as may be prescribed.

Section 20(2) of CGST Act

Section 20(2): The Input Service Distributor may distribute the credit subject to the following conditions, namely: ––

  • (a) the credit can be distributed to the recipients of credit against a document containing such details as may be prescribed;
  • (b) the amount of the credit distributed shall not exceed the amount of credit available for distribution;
  • (c) the credit of tax paid on input services attributable to a recipient of credit shall be distributed only to that recipient;
  • (d) the credit of tax paid on input services attributable to more than one recipient of credit shall be distributed amongst such recipients to whom the input service is attributable and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all such recipients to whom such input service is attributable and which are operational in the current year, during the said relevant period;
  • (e) the credit of tax paid on input services attributable to all recipients of credit shall be distributed amongst such recipients and such distribution shall be pro rata on the basis of the turnover in a State or turnover in a Union territory of such recipient, during the relevant period, to the aggregate of the turnover of all recipients and which are operational in the current year, during the said relevant period.

Explanation: For the purposes of this section, ––

  • (a) the “relevant period” shall be––
    • (i) if the recipients of credit have turnover in their States or Union territories in the financial year preceding the year during which credit is to be distributed, the said financial year; or
    • (ii) if some or all recipients of the credit do not have any turnover in their States or Union territories in the financial year preceding the year during which the credit is to be distributed, the last quarter for which details of such turnover of all the recipients are available, previous to the month during which credit is to be distributed;
  • (b) the expression “recipient of credit” means the supplier of goods or services or both having the same Permanent Account Number as that of the Input Service Distributor;
  • (c) the term ‘‘turnover’’, in relation to any registered person engaged in the supply of taxable goods as well as goods not taxable under this Act, means the value of turnover, reduced by the amount of any duty or tax levied under entry 84 and 92A of List I of the Seventh Schedule to the Constitution and entries 51 and 54 of List II of the said Schedule.
  1. Section 20 of CGST Act 2017 shall come into force on 01.07.2017 vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017. ↩︎


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