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11 August, 2017

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Insert This Clause In Your Vendor Contracts to be Safer In GST

Indemnity Clause in Vendors/ Suppliers Contract A Must in GST

By CA Ankit Gulgulia (Jain)

Under the Provisions of Section 16 of CGST Act, 2017, 

No registered person shall be entitled to the credit of any input tax in respect of any supply of goods or services or both to him unless,––

(a) he is in possession of a tax invoice or debit note issued by a supplier registered under this Act, or such other tax paying documents as may be prescribed;

(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 utilisation of input tax credit admissible in respect of the said supply; and

(d) he has furnished the return under section 39


Clearly as you can see above, under the GST Regime to claim the input tax credit, mere payment of GST to your vendor / supplier is not enought. As per Section 16, the tax so paid by you must also be deposited by such vendor and due return shall be filed accordingly to reflect gst paid on your GST Number. 

In such a Instance a Clause to Indemnify should be inserted in your vendor agreements that where the liability has been duly discharged by making of tax payments to such vendor, any loss of eligible input tax credit for non payment / non filing of return and applicable interest / penalties shall be duly indemnified by such vendor. 

Till Tomorrow... Happy Reading !

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