The distinction between the jīva and the īśvara will be explained in the Thirteenth Chapter of Bhagavad-gītā. The Lord is kṣetra-jña, conscious, as is the living being, but the living being is conscious of his particular body, whereas the Lord is conscious of all bodies. Because He lives in the heart of every living being, He is conscious of the psychic movements of the particular jīvas. We should not forget this. It is also explained that the Paramātmā, the Supreme Personality of Godhead, is living in everyone's heart as īśvara, as the controller, and that He is giving directions for the living entity to act as he desires. The living entity forgets what to do. First of all he makes a determination to act in a certain way, and then he is entangled in the actions and reactions of his own karma. After giving up one type of body, he enters another type of body, as we take off and put on clothes. As the soul thus migrates, he suffers the actions and reactions of his past activities. These activities can be changed when the living being is in the mode of goodness, in sanity, and understands what sort of activities he should adopt. If he does so, then all the actions and reactions of his past activities can be changed. Consequently, karma is not eternal. Therefore we stated that of the five items (īśvara, jīva, prakṛti, time and karma) four are eternal, whereas karma is not eternal.
The supreme conscious īśvara is similar to the living entity in this way: both the consciousness of the Lord and that of the living entity are transcendental. It is not that consciousness is generated by the association of matter. That is a mistaken idea. The theory that consciousness develops under certain circumstances of material combination is not accepted in the Bhagavad-gītā. Consciousness may be pervertedly reflected by the covering of material circumstances, just as light reflected through colored glass may appear to be a certain color, but the consciousness of the Lord is not materially affected. Lord Kṛṣṇa says, mayādhyakṣeṇa prakṛtiḥ (BG 9.10). When He descends into the material universe, His consciousness is not materially affected. If He were so affected, He would be unfit to speak on transcendental matters as He does in the Bhagavad-gītā. One cannot say anything about the transcendental world without being free from materially contaminated consciousness. So the Lord is not materially contaminated. Our consciousness, at the present moment, however, is materially contaminated. The Bhagavad-gītā teaches that we have to purify this materially contaminated consciousness. In pure consciousness, our actions will be dovetailed to the will of īśvara, and that will make us happy. It is not that we have to cease all activities. Rather, our activities are to be purified, and purified activities are called bhakti. Activities in bhakti appear to be like ordinary activities, but they are not contaminated. An ignorant person may see that a devotee is acting or working like an ordinary man, but such a person with a poor fund of knowledge does not know that the activities of the devotee or of the Lord are not contaminated by impure consciousness or matter. They are transcendental to the three modes of nature. We should know, however, that at this point our consciousness is contaminated.