ISD not a Mandate pre 2025

The Kerala High Court quashed a GST demand and penalty raised against Intertek India Pvt. Ltd., holding that Input Tax Credit (ITC) availed on imported services under the reverse charge mechanism was legally admissible.

That, during the period July 2017 to March 2019, distribution of such credit to other registered units through cross-charge did not mandatorily require registration as an Input Service Distributor (ISD). 

The impugned order had directed reversal of ITC amounting to ₹1.31 crore and imposed an equivalent penalty on the allegation of wrongful availment of credit and illegal distribution of such credit without ISD registration. The writ petition was allowed and the demand was set aside. 

The Court held that the department had misapplied the statutory provisions governing reverse charge transactions and incorrectly treated the ISD mechanism as compulsory prior to the amendments introduced through the Finance Act, 2024.