Supply of service between related persons: guarantees are taxable and valuation follows Rule 28, with specified exceptions for personal guarantees. The circular treats personal guarantees by directors as a supply of service between related persons and directs valuation under Rule 28; where RBI mandates no consideration for such personal guarantees, open market value may be treated as zero, yielding nil taxable value unless remuneration is actually paid. Corporate guarantees provided by related companies or by a holding company for its subsidiary are also supplies of service, with taxable value to be determined pursuant to Rule 28(2) as inserted by Notification No. 52/2023, irrespective of input tax credit availability. Rule 28(2) does not apply to personal guarantees.
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Provisions expressly mentioned in the judgment/order text.
Supply of service between related persons: guarantees are taxable and valuation follows Rule 28, with specified exceptions for personal guarantees.
The circular treats personal guarantees by directors as a supply of service between related persons and directs valuation under Rule 28; where RBI mandates no consideration for such personal guarantees, open market value may be treated as zero, yielding nil taxable value unless remuneration is actually paid. Corporate guarantees provided by related companies or by a holding company for its subsidiary are also supplies of service, with taxable value to be determined pursuant to Rule 28(2) as inserted by Notification No. 52/2023, irrespective of input tax credit availability. Rule 28(2) does not apply to personal guarantees.
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