Letter of undertaking / Indemnity Bond from Supplier by the Recipient - Deposit of Tax & Furnishing the Return u/s 39 in order to avail ITC under sec 16 of CGST Act
1. As per sec 16(2) of CGST Act 2017, registered taxable person shall not be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless following conditions are satisfied:-
(a) He is in possession of a Tax Invoice or debit note issued by a supplier.
(b) He has received the goods or services or both.
(c) Subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilization of input tax credit admissible in respect of the said supply; and
(d) He (Recipient) has furnished the return under section 39
2. Condition indicated at Para 1(c ) above is crucial for the recipient . As per this provision , unless and until supplier has paid the tax which was collected from the recipient; later is not eligible to take input tax credit.
3. The burning issue here is that how recipient can know that supplier has deposited the tax collected from him into the Government Account?
4. Reflection of invoice in GSTR 2A cannot be treated as conclusive evidence as Supplier can file GSTR 1 without deposited tax collected and the same will be reflected in GSTR 2A .This may results in litigation issues and notices in future for wrongful availment of credit.,
5. In order to avoid such complications It is recommended to take Indemnity Bond/Undertaking from the supplier stating tax collected from recipient is deposited to the Government..
6. Format recommended for INDEMNITY BOND / UNDERTAKNIG is indicated below :-
INDEMNITY BOND CUM UNDERTAKING
(Supplier should provide undertaking in its letter head with seal and signature)
Recipient Name: M/s
Sub : Payment of GST Amount and filing of GST Return for availing Input Tax Credit (ITC) by the recipient .
(a) With reference to payment of GST amount and filing of GST Return for availing Input Tax Credit (ITC) by you as per eligibility provisions for the identified Invoices raised by us, we, M/s.____________________(supplier name) having our Registered Office at ________________________________, possessing GST Identification No.__________________________ hereby declare and undertake as follows:
(b) We have disclosed all the facts relating to our Firm / Company to .......( (recipient name) .......( recipient address).......(.recipient GSTN)..
(c) We hereby declare that we have paid/agree to pay GST for the related invoices as per details below to the respective GST Authorities.
Sl. No. Order No. Order Date Invoice No. Invoice Date Assessable Value/Rs. IGST/Rs. CGST/Rs. SGST/Rs. Date of Payment
(d) In this connection, we hereby agree and undertake to furnish to you proof of payment of GST, which includes above mentioned GST amount.
(e) We hereby declare that we have filed GSTR 3B related to the above mentioned invoices in time. In this connection, we hereby agree and undertake to furnish you proof of electronically filed GST Return to the authority.
(f) We hereby agree and undertake to indemnify that the Firm / Company shall take all necessary safeguards to ensure availing of ITC on above mentioned invoices as per eligibility within the time limit provided in the GST provision.
(g) We hereby undertake and agree to indemnify. that in case of rejection of ITC by the concerned Tax Authority, for non payment of GST amount by us or for any other reasons attributable to us ,we will discharge liabilities of any kind whatsoever directly arising from denial of ITC which includes interest and penalty arising out of such irregular availment of ITC by you opined by GST Authority..
(h) We hereby agree and confirm that any breach of the above indemnification or undertakings shall be construed as breach of the terms and conditions for reimbursement of GST and ..........(Recipient Name) shall be at liberty to take such action against us including recovering of reimbursed GST amount from
(i) Any of our Bank Guarantee executed in your favour, if any,
(ii) Security Deposit paid for any of your work ,if any or
(iii) Other unpaid invoices, if any of us raised with recipient
(i) I / We declare that I am empowered to execute this Indemnity Bond cum undertaking and the same is given under the orders of proper authority as per the delegation of power of the organization.
Authorised Signature of the Indemnifier