GST on Bank Guarantee between two unrelated Indian Companies.

[KALLESHAMURTHY MURTHY K.N.]

Sirs, 

Company “A” has provided a Bank guarantee with Citibank Dubai to an unrelated Company “B”. Both are situated in India. The bank guarantee is either for consideration or without consideration. Whether GST is payable, and if so, what tax, whether IGST or CGST+SGST and who is liable to pay tax?

AI Summary

Bank guarantee taxation: non-resident bank triggers IGST reverse charge; Indian bank charges CGST and SGST; consideration matters (s.5(3)) If the bank issuing the guarantee is located outside India, the guarantee is an import of service and IGST is payable under reverse charge by the Indian recipient (applicant/beneficiary) on the value of the service. If the bank is located in India, the service is taxable at the place of supply in India and attracts CGST+SGST, charged by the bank to the recipient. Where consideration is actually paid the service is taxable; a guarantee provided without consideration generally will not be a taxable supply unless another provision deems it so. Liability depends on supplier location and actual payment; reverse charge applies for non-resident suppliers.