Multi-state businesses face a structural choice: centralise common service procurement and distribute through ISD, or direct-bill each branch GSTIN separately. Each approach has distinct compliance, cash flow, and operational implications. With the ISD mechanism becoming mandatory from April 2025, the choice has narrowed for common input services.
This article explains both structures and the factors to consider.
GSTIN-Wise Direct Billing
In this model, each branch procures services directly from vendors. The invoice is addressed to the branch GSTIN, and the branch claims ITC directly.
Advantages:
- Simpler ITC flow — no ISD distribution required.
- No ISD registration or GSTR-6 filing.
- Branches have full visibility of their costs.
Disadvantages:
- Loss of centralised procurement leverage.
- Multiple vendor contracts and invoices.
- Higher administrative burden.
ISD Distribution
In this model, the HO procures services centrally and distributes ITC through the ISD mechanism.
Advantages:
- Centralised procurement leverage.
- Standardised ITC distribution.
- Compliance with the mandatory ISD mandate.
Disadvantages:
- ISD registration and GSTR-6 filing required.
- Distribution ratio calculation.
- ERP system changes required.
When Each Structure Works
- Direct billing: Suitable where branches have distinct procurement needs and vendors can invoice each GSTIN.
- ISD: Mandatory for common input services procured centrally from April 2025.
Practical Implementation
- Assess common expenses and classify them as ISD or direct.
- For ISD, obtain registration and configure ERP.
- Communicate with vendors about the correct billing entity.
- File GSTR-6 monthly.
Conclusion
The ISD mandate has made centralised procurement the default for common input services. Direct billing remains viable for branch-specific expenses. Businesses must classify costs correctly and implement the right structure.
At Anuj Desai & Associates, we provide expert advisory services on ISD implementation and multi-state GST structuring. Our team can help you choose the right model.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.