New GST rules from April 1: What changes for businesses
The government has announced a key change in GST rules, introducing the Input Service Distributor (ISD) system from April 1, 2025. This system will help state governments collect the correct tax amount on shared services provided at a single location.
What is the ISD mechanism?
The 2024 Finance Act (No. 1) amended the CGST Act to implement ISD. This system allows businesses operating in multiple states to centralise invoices for common input services (domestic or imported) at a single branch or headquarters.
It ensures fair distribution of input tax credit (ITC) among branches using these shared services.
What is Input Tax Credit (ITC)?
ITC is the tax paid on business purchases, which can be deducted from output tax liability. It applies to GST paid on goods or services used for business purposes. Proper ITC utilization reduces a business’s overall tax liability.
