TaxTMI 
TaxTMI 
Sir
Whether GST applicable in case of corporate guarantee given to sister concern.
Further, if full time director gives personal guarantee to company, whether RCM applicable.
Corporate guarante
10 Dec 2021 
7 Replies 
4885 Views Asked by
GST on corporate guarantees depends on existence of consideration; absence means no supply, else tax liability arises.
GST on corporate guarantees depends on recorded consideration: if no consideration is reflected in books the transaction is not a supply under Section 7(1)(a) and no GST arises; if consideration exists the guarantor may be liable and one may alternatively treat the obligation under the reverse charge mechanism with the company discharging tax and availing input tax credit. Characterisation of a director's guarantee turns on whether an employer employee relationship exists; valuation and 'out of books' consideration are enforcement concerns. (AI Summary)
GST on corporate guarantees depends on recorded consideration: if no consideration is reflected in books the transaction is not a supply under Section 7(1)(a) and no GST arises; if consideration exists the guarantor may be liable and one may alternatively treat the obligation under the reverse charge mechanism with the company discharging tax and availing input tax credit. Characterisation of a director's guarantee turns on whether an employer employee relationship exists; valuation and 'out of books' consideration are enforcement concerns. (AI Summary)