ISD credit distribution: recipient eligibility and transfer treatment clarified

CBIC Circular 260/06/2026-GST, dated 26 October 2026, clarifies how Input Service Distributors handle credit for services received on behalf of distinct GST registrations.

Each office receiving covered invoices must examine its ISD registration obligation. More than one ISD within a State is permitted for different offices or business divisions, provided distribution follows actual attribution and the prescribed rules.

ISD distribution does not settle the recipient’s ultimate credit eligibility. Recipient registrations remain responsible for section 16 conditions and applicable section 17 reversals. Eligible and ineligible amounts must be identified separately, and distribution should follow the period in which eligibility can first be ascertained through GSTR-6A.

A same-PAN, same-State transfer document under rule 54(1A) transfers credit; it is not an outward supply. Its value should therefore not inflate the relevant turnover calculations. Credit transferred away is also excluded from the transferring registration’s relevant refund credit computation.

Businesses should map shared-service invoices to recipient GSTINs, document allocation, reconcile GSTR-6 and review reversals and refund workings before claiming credit.