GST on corporate Guarantee by directors and relatives

[ROHIT GOEL]

Dear Experts,

Company A has 3 directors and has raised substantial Term loans and Cash credit limits from Banks. In lieu of the same, the directors have given their personal guarantee. Furthermore, the immediate relatives of the directors including their spouse, son, father as well as brother have also given personal guarantees. Further, another company in which one of the directors is director has also given corporate guarantee. No guarantee fees/commission is being charged by any of the guarantors.

In this regard, I have the following queries:

1. Whether GST would be leviable on Personal guarantee by directors since they are deemed to be related persons? Would the answer be different if directors are drawing salary from company?

2. Whether GST would be leviable on personal guarantee by directors' relatives mentioned above? Are they deemed to be related persons as defined in Section 15 of CGST Act?

3. Whether GST would be leviable on corporate guarantee given by another company, just because they have single common director? (Section 15 defines two entities to be related if they are controlled by the same persons)

4. Any other GST effect of such transaction.

Your views would be appreciated.

AI Summary

GST Applicability on Personal and Corporate Guarantees by Directors and Relatives: Potential Audit Disputes and Valuation Challenges A discussion on the applicability of GST on personal and corporate guarantees provided by directors and their relatives for Company A's loans. The queries focus on whether GST applies to personal guarantees by directors, especially if they are salaried, and their relatives, as well as corporate guarantees by another company with a common director. The response suggests that personal guarantees might not involve a service element, potentially affecting GST applicability, but acknowledges that these issues could lead to disputes during audits. The absence of valuation for guarantees could complicate GST levies.