Written By: Mobin
The main objective of the ISD system is to ensure the correct distribution of tax revenue among the states.
The use of ISD system will be mandatory from April 1, 2025. If ITC is wrongly distributed, the tax authority will charge interest and penalty.
Input Tax Credit (ITC) allows businesses to deduct the tax paid on their purchases from the output tax, thereby reducing the total GST liability.
Under the new rules, misdistribution of ITC will attract a penalty of Rs 10,000 or equal to the ITC amount. Also, interest will have to be paid.
The ISD system will help businesses manage their tax liabilities better. This system will bring transparency.
The ISD system will ensure proper distribution of tax revenue among states. This system will also help in preventing tax evasion.
Earlier businesses had two options for ITC distribution, cross-charge and ISD. Now only ISD system has to be used.