Mapping ISD under GST in Oracle EBS: Process Document

 Definition: Input Service Distributor (ISD)

Who is an Input Service Distributor (ISD) under GST? An Input Service Distributor (ISD) is a taxpayer that receives invoices for services used by its branches. It distributes the tax paid known as the Input Tax Credit (ITC), to such branches on a proportional basis by issuing ISD invoices.

 

Input Service Distributor (ISD) Under GST:

An Input Service Distributor (ISD) is a special type of GST taxpayer that plays a role in the distribution of the Input Tax Credit (ITC) for services to its branches or establishments. ISD is not involved in the direct supply of goods or services but acts as a conduit to allocate ITC to various units or branches that use the input services.

What is ISD in India:

ISD (Input Service Distributor) is a mechanism under the GST (Goods and Services Tax) framework in India where the head office (or a centralized office) receives invoices for services (like consulting, audit, legal, advertisement, etc.) that are used by multiple branches or units across different states. ISD facilitates the fair distribution of Input Tax Credit (ITC) to the respective branches.

 

How ITC is Distributed:

The Input Tax Credit (ITC) on the central services is distributed proportionately to different branches (based on their turnover or usage).

This distribution is done using a special invoice called the ISD Invoice.

Each branch or unit that receives the ITC must be eligible to use the credit (i.e., they must be registered under GST).

 

Conditions for Distribution:

The distribution is based on a pro-rata basis or a ratio as per the turnover of each branch, but the method has to be consistently applied.

No Direct Supply of Goods/Services: The ISD does not make any outward supply of goods or services; it only distributes the credit.

 

Registration: 

Business gets an ISD registration for the location handling shared services (common expenses).

Only one ISD registration per legal entity is allowed.

The location with receipt of service bills for common expenses must register as ISD.

ISD only applies to input services, not goods.

Parent Company needs to define Additional Inventory/OU with ISD Location and the first party needs to define at the OFI Setups.

 

Simplified ISD approach under GST that end users are required to follow

 

1.      Expense & GST Accounting:

ISD location receives invoices (Bill to) for common services (expenses).

The ISD location accounts for the common expenses.

 

    ISD location (Head office) claims ITC in GSTR-6

It pays the applicable GST on services received.

The GST paid becomes eligible for ITC (Input Tax Credit).

 

2.      ITC Allocation to Branches: 

The ISD allocates the ITC and proportionate expenses to branches under the same PAN.

This is done via internal transactions (manual intercompany AR Invoices) for the services used by each branch.

 

3.      Branches Claim ITC: 

Branches record accounts payable (AP) invoice received from ISD.

They apply the GST to claim the transferred ITC.

 

4.      Utilization & Settlement: 

Branches use the credited ITC to offset their output GST liabilities. Branches receive ITC and reflect it in their GSTR-3B

The ISD can offset its overall IGST/CGST/SGST liabilities against its ITC during GST return filing. 

 

Example of an Input Service Distributor (ISD)

Let’s take a real-world example to better understand the concept of ISD under GST:

Example:

Suppose there is a company called ABC Ltd., which has its head office and 3 regional offices in different states. ABC Ltd. centralizes certain services like legal services, accounting, and IT support in its head office.

The head office of ABC Ltd. receives an invoice for legal services worth ₹100,000 and pays a GST of ₹18,000 on the service (₹100,000 * 18% GST).

The head office is registered under GST and is eligible to receive the Input Tax Credit (ITC) of ₹18,000 on these services.

However, the legal services are not only used by the head office but are also used by the 3 regional offices. Therefore, the GST credit needs to be distributed among the head office and regional offices based on their turnover.

Let’s assume that the turnover of the offices is as follows:

Head office: ₹50,00,000

Regional office 1: ₹30,00,000

Regional office 2: ₹10,00,000

Regional office 3: ₹10,00,000

The total turnover is ₹1,00,00,000.

Now, the ISD will distribute the ₹18,000 ITC to each office based on their turnover proportion.

Calculation:

Total turnover = ₹50,00,000 (head office) + ₹30,00,000 (regional office 1) + ₹10,00,000 (regional office 2) + ₹10,00,000 (regional office 3) = ₹1,00,00,000.

Each office’s share of the ITC:

Head office: ₹18,000 * (₹50,00,000 / ₹1,00,00,000) = ₹9,000

Regional office 1: ₹18,000 * (₹30,00,000 / ₹1,00,00,000) = ₹5,400

Regional office 2: ₹18,000 * (₹10,00,000 / ₹1,00,00,000) = ₹1,800

Regional office 3: ₹18,000 * (₹10,00,000 / ₹1,00,00,000) = ₹1,800

Result:

The Head office will retain ₹9,000 of the ITC.

Regional office 1 will get ₹5,400 of the ITC.

Regional office 2 and 3 will get ₹1,800 each.

Reference Document Source: 

1. OFI: What is The Functionality To Raise Input Service distributor (ISD) Invoice And Is There Any Separate trial balance Available for that? (Doc ID 3042592.1)

2.    OFI: Need To Understand The Functionality For (Input Service Distribution) ISD Under GST (Doc ID 2287567.1)

Oracle Sourcing Module: Features with Real-Life Examples

1. Request for Information (RFI)

- Used to gather preliminary information from suppliers before a formal procurement process.
Example: A company sends an RFI to IT vendors to understand their capabilities before issuing an RFQ.

2. Request for Quotation (RFQ)

- Used to invite detailed pricing and delivery quotes from suppliers.
Example: After RFI review, an RFQ is issued to shortlisted vendors for IT equipment pricing.

3. Auctions

- Supports auctions for real-time competitive bidding.
Example: A auction is conducted for office supplies where suppliers lower prices to win the deal.

4. Sealed and Blind Quotes

- Sealed: Quotes remain hidden from both competitor suppliers and the buyer until the deadline.
- Blind: Suppliers cannot see competitors’ quotes, but the buyer can view all submitted quotes once they are submitted by the suppliers.

Example: For a confidential project, sealed bidding is used to ensure impartiality.

5. Negotiation Templates

- Templates standardize and speedup sourcing events with predefined formats, controls, questions and terms.
Example: A company uses a template for yearly hardware procurement to save setup time.

6. Terms and Conditions Acceptance

- Suppliers must accept terms and conditions before submitting bids.
Example: Suppliers agree to standard T&Cs before quoting for an infrastructure RFQ.

7. RFQ Controls

-  Purpose: Manage how suppliers interact with the RFQ and how the negotiation is conducted.

Features Include:

-      Invited Supplier Participation: Only specific, approved suppliers can view and respond to the RFQ.

-      Manual Early Close: The RFQ can be manually closed before the scheduled close date if required.

-      Extend Close Date: The RFQ close date can be extended based on business needs or low participation.

-      Allow Multiple Quotes: Suppliers can submit more than one quote if enabled, allowing for different pricing or delivery scenarios.

-      Allow Quote to Alternate Lines: Suppliers can propose quotes for alternate items or configurations if allowed.

-      Response Style Options: Open, Sealed, or Blind quote settings can be configured for fairness and transparency.

-      Negotiation Style: Can be set as RFQ, Auction, or RFI depending on the requirement.

Example: A procurement officer sets up an RFQ where only shortlisted suppliers are invited. As few suppliers respond initially, they extend the RFQ deadline. A supplier submits two different quotes for alternate products on the same line item, which are all captured and evaluated.

 

8. Attachment Upload with Quote Submission

- Suppliers can upload supporting documents with their quotes.
Example: A vendor submits compliance certificates with their quote for lab equipment.

9. Scoring and Evaluation

- Enables objective bid evaluation based on price, delivery, etc.
Example: Proposals are scored for cost, delivery time, and warranty to identify the best supplier.

10. Questionnaires

- Add detailed questions for suppliers within sourcing events.
Example: An RFQ includes a questionnaire on environmental compliance and certifications.

11. Collaboration Team

- Involve technical, finance, and legal teams in sourcing decisions.
Example: A technical expert is included in evaluating the technical specs of vendor bids.

12. Award Analysis

- Analyze bids using tools and reports to support award decisions.
Example: The team compares total cost and delivery options to finalize a vendor.

13. Auto Awarding

- Automatically awards bids based on scoring thresholds.
Example: The system auto-selects the vendor with the best score when the event closes.

14. Award Approval

- Route award decisions through approval hierarchy.
Example: The final award is reviewed and approved by procurement and legal teams.

15. Purchase Order (PO) Creation

- Converts awarded negotiations into POs in Oracle Purchasing.
Example: A PO is auto-generated and sent to the awarded supplier after approval.

Oracle iSupplier Portal: Real-Life Usage in Procurement

 

1. Purchase Order (PO) Collaboration

- Suppliers can view and confirm purchase orders (POs) online.
- They can request changes to quantity, price, or delivery dates.
- Partial shipments can also be proposed by suppliers.

Example: A supplier logs into the portal, sees a new PO, confirms it, and requests a delivery date change.

2. Shipment Management

- Suppliers submit Advance Shipment Notices (ASN) to notify buyers about shipments.
- Advance Billing Notices (ABN) can also be sent along with ASN for early invoice processing.

Example: A supplier sends an ASN and ABN before dispatching goods, helping the buyer prepare for receiving and payment.

3. Invoice and Payment Tracking

- Suppliers can create and submit invoices online.
- They can check the status of their payments at any time.

Example: A supplier sees their invoice has been approved and scheduled for payment next week.

4. Inventory Management

- Vendors can manage inventory at the buyer’s site using Vendor Managed Inventory (VMI).
- Consigned Inventory allows suppliers to retain ownership until items are used.

Example: A supplier keeps stock at a buyer's warehouse and gets notified when it runs low.

5. Supplier Profile Management

- Suppliers can update their contact info, tax details, and certifications.
- They can manage user access for their team members.

Example: A supplier updates their GST number and adds a new contact person.

6. Communication and Collaboration

- Suppliers receive real-time alerts for new orders and changes.
- Files like product specs and agreements can be exchanged online.

Example: A supplier is notified of an urgent PO and sends back the signed terms through the portal.

7. Improved Accuracy and Efficiency

- Automation reduces manual work and errors.
- All information is centralized and easily accessible.

Example: No need to call or email—the supplier finds PO, ASN, and payment info in one place.

8. Internal View Usage for Buyers

- Buyers can use 'Internal View' to monitor all supplier transactions.
- It helps with auditing, tracking acknowledgments, and ensuring compliance.

Example: A buyer checks if a supplier acknowledged a PO and submitted an ASN as expected.

Oracle Supplier Lifecycle Management: Real-Life Use Cases You Should Know

1. Supplier Registration and Onboarding

Use: Automates the supplier registration process through a self-service portal. Buying organization can invite the supplier for registration or Supplier can proactively self-register through the iSupplier portal/ SLM.

Features:

●        - Necessary information collection: Suppliers need to be provided necessary information during online registration, like company details

●        - Attachment of Necessary Documents: Suppliers can upload mandatory documents such as GST certificates, PAN, ISO certifications, and company profiles.

●        - Terms and Conditions Acceptance (Optional): Organizations can configure the system to optionally prompt suppliers to accept terms and conditions during registration.

●        - Multiple Levels of Approval (Optional): Approvals for new supplier registration can be routed through multiple stakeholders like Procurement, Finance, and Legal, based on the company’s policy.

Example: A supplier registers through the portal, provide necessary informations, uploads tax documents, and the registration is routed to Procurement → Finance → Compliance teams before activation.

2. Supplier Qualification and Approval

Use: Assesses supplier capabilities using qualification questionnaires.

Example: Before approving a supplier for raw materials, buying company can sends out a qualification questionnaire. Based on the responses and scoring, the supplier is either approved, rejected, or assigned corrective actions.

3. Supplier Profile Audit

Use: Facilitates internal audits to ensure supplier compliance and verify data accuracy.

Example: The Internal Compliance Team initiates an annual/periodic audit requesting updated profile information, ISO certification and insurance documents from key suppliers.

4. Supplier Performance Assessment

Use: Collects performance ratings of the suppliers from internal stakeholders of the buying organization based on KPIs like delivery time, quality, and responsiveness.

Example: A retail chain rates suppliers monthly on delivery timeliness and product quality. Underperforming vendors are reviewed and may be given improvement plans.

5. Notify Supplier

Use: Buyers can send system-generated notifications or manual messages to suppliers.

Example: A supplier receives an automated notification when their registration status changes or a manual message if, for instance, some documents are missing.

6. Online Chat and Collaboration Team Features

Use: Enables cross-functional team collaboration and real-time chat internally.

Example: Procurement, Finance, and QA collaborate using the 'Collaboration Team' feature to evaluate a high-risk supplier before onboarding.

7. Advanced Search Using User-Defined Attributes (UDA)

Use: Allows complex searches using standard and custom-defined attributes.

Example: A category manager filters suppliers with ISO 9001 certification and MSME status using UDAs.

8. Invitation List

Use: Manages the supplier invitation process during sourcing or registration.

Features:

●        - Dynamic Invitation List: Based on rules like region, category, or UDA values, the system auto-generates eligible suppliers for events or registrations.

●        It's also possible to create invitation list and add suppliers manually without using any rules.

Example: A buyer invites all suppliers for sourcing, or profile audit, tagged under 'Chemical Raw Materials' using invitation list.

9. Supplier Profile Information Change Request

Use: Allows suppliers to request changes to profile data, which is subject to buyer review.

Example: A supplier submits a request to update their bank account, address and contact number. Procurement reviews and approves the request before it is finalized in the system.

10. View and Edit Privileges for UDA

Buyers can create custom fields (UDA: User Defined Attribute) to capture supplier-specific information that isn’t available in standard supplier master attributes (e.g., Environment Certifications, CSR Ratings, MSME Code).

Use: Controls who can see or modify specific UDAs.

Example: Only the Finance team can edit 'Payment Terms' UDA, while others can view it only.

11. Single-Row and Multi-Row UDAs

Use:

●        - Single-Row UDA: Captures individual fields such as PAN or GST number.

●        - Multi-Row UDA: Captures tabular data like list of past audits or product certifications with expiry dates.

Example: A supplier uploads multiple ISO certificates in a multi-row UDA, each with issue and expiry dates, while contact info is stored in a single-row UDA.

My Oracle ERP Journey: Welcome to The Functional Corner

Hello and welcome to The Functional Corner! I’m Santanu, and I’m thrilled to start this blog where I’ll be sharing my experiences, lessons, and tips as an Oracle Functional Consultant.

For the past few years, I’ve been working closely with Oracle EBS and Fusion applications, especially in Supply Chain Management (SCM), Procurement, and Finance modules. Along the way, I’ve faced challenges, learned new skills, and found solutions to complex problems. This blog is my way of sharing those insights with you — whether you’re a beginner, a fellow consultant, or simply curious about Oracle ERP systems.

What to expect here?

• Real-world tips and tricks for Oracle EBS & Fusion

• Step-by-step guides on functional modules

• Troubleshooting common issues

• Career advice for aspiring ERP professionals

• Updates on new features and best practices

My goal is to create a friendly space where we can learn together and grow our functional consulting skills. If you have any questions or topics you’d like me to cover, feel free to reach out in the comments or contact me directly.

Thank you for joining me on this journey. Let’s dive into the world of Oracle Functional Consulting — one corner at a time!

Stay tuned for the next post!