Service tax on corporate Guarantee to Group Company

[Prakash Gupta]

Dear Expert,

Need your view on below mentioned query :

Whether Tax will be applicable on Corporate Guarantee give by Holding Company to it Subsidiary Company under the provision of Service Tax as well as GST. Please note that no fees/amount has been charged by the Holding Company for giving Guarantee to its subsidiary Company.

Thanks ,

Pankaj Singh

[DR.MARIAPPAN GOVINDARAJAN]

In my view NO

[Prakash Gupta]

Sir,thanks for your reply. Pl support your view with Act.

[Himansu Sekhar]

Under GST

Circular No. 34/8/2018-GST dated 01.03.18

(2) The service provided by Central Government/State Government to any business entity including PSUs by way of guaranteeing the loans taken by them from financial institutions against consideration in any form including Guarantee Commission is taxable.

Similar is the situation for the companies. giving guarantee. It is taxable. Regarding consideration ....... aspect much deliberation is required.

Regarding S.tax, in my view, it is taxable under Banking & financial services, taxable services after 01.07.12

My personal opinion.

[Himansu Sekhar]

Further analysis is required on this subject

[KASTURI SETHI]

On this issue SCN was issued against M/s.Virgo Boards on 12.10.15 by the Commissioner, Central Excise Audit-1 New Delhi . Decision is not known.

[Ganeshan Kalyani]

The definition of service states as any activity carried out by a person for another for a consideration. In the query posted the element of consideration is missing hence in my view service tax was not payable.

Under GST, it is better to charge GST if the receiving entity is able to get input tax credit.

[Kothapally RajiReddy]

Sir, It seems GST is payable on corporate guarantee even if no consideration is received in terms of Schedule-I to CGST Act as the subsidiary company is related to holding company.

AI Summary

Taxability of corporate guarantee: GST may apply where related party deemed supply rules treat guarantees as taxable even without consideration.
The core issue is whether a holding company's corporate guarantee to its subsidiary is taxable: one view relies on the consideration requirement to exclude service tax, while another treats guarantees as potentially taxable under GST by analogy to government guarantee guidance and via deemed supply rules for related parties, especially where the recipient can claim input tax credit.