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Research Paper | Computer Science and Information Technology | United States of America | Volume 14 Issue 5, May 2025 | Popularity: 5.3 / 10
Optimizing Input Tax Credit Distribution through ISD Mechanism-Part 2: Functional Configuration and Operational Execution in SAP
Avnish Goyal
Abstract: This paper is the second in a two-part series focused on the Input Service Distribution (ISD) mechanism under the Central Goods and Services Tax (CGST) Act, 2017, which governs the allocation of Input Tax Credit (ITC) on common services across multiple business units. With ISD provisions becoming mandatory from April 1, 2025, as per Notification No. 16/2024 ? Central Tax, businesses are required to implement robust systems to ensure accurate and compliant ITC distribution. Building upon the technical foundation established in the first paper, this second part delves into the functional implementation and operational execution of ISD processes within SAP systems. It provides a detailed overview of functional configuration steps, including Official Document Number (ODN) setup, transaction processing, and the issuance of ISD invoices as prescribed under Rule 54(1) of the CGST Rules, 2017. The paper offers practical guidance supported by real-world case studies and examples, illustrating the proportional distribution of ITC based on turnover and tax jurisdiction. It highlights how SAP enables organizations to execute compliant, transparent, and efficient ISD operations across multiple branches, ensuring end-to-end control and audit readiness.
Keywords: Input Service Distribution (ISD), India GST, Input Tax Credit (ITC), SAP Solutions for ISD, CGST Compliance, SAP CIN Implementation
Edition: Volume 14 Issue 5, May 2025
Pages: 418 - 426
DOI: https://www.doi.org/10.21275/SR25505233529
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