TaxTMI 
TaxTMI 
Clarification on various issues pertaining to taxability and valuation of supply of services of providing corporate guarantee between related persons
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....ween related persons - Issued - Reg. Ref: 1. Central Notification No.52/2023-Central Tax, dated 26.10.2023. 2. G.O.Ms.No.561, Revenue (CT) Department, dated 24.11.2023 3. Central Circular No.204/16/2023-GST, dated 27.10.2023 4. CCST's Proceedings in Ref.No.Comp.No.2259284, File No.REV03-12039(31)/152/2023-COMM, dated 29.11.2023 5. Central Notification No.12/2024-Central Tax, dated 10.07.2024. 6. G.O.Ms.No.174, Revenue(CT) Department, dated 30.08.2024. 7. Central Circular No.225/19/2024-GST, dated 11.07.2024 issued by the Central Board of Indirect Taxes and Customs, Department of Revenue, Ministry of Finance, Government of India, New Delhi. *** ORDER 1.1 As per the recommendations of the GST Council, sub-rul....
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....ification 1 Whether sub-rule (2) of rule 28 of APGST Rules will apply to the corporate guarantees issued prior to insertion of the said sub-rule on 26th October 2023? Also, where intra-group corporate guarantees have been issued before 26th October 2023, which are still in force today, would they be liable to pay GST on "1% of the amount of such guarantee offered" on such guarantees It is to be clarified that the supply of service of providing corporate guarantee to any banking company or financial institution by a supplier to a related recipient, on behalf of the said recipient, was taxable even before the insertion of sub-rule (2) in rule 28 of APGST Rules with effect from 26th October 2023. Rule 28(2) of APGST Rules is only for ....
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....linked with the actual disbursal of the loan. The service that is provided by the guarantor to the guarantee is that of taking on the risk of default. Therefore, it is clarified that the value of supply of the service of providing a corporate guarantee will be calculated based on the amount guaranteed and will not be based on the amount of loan actually disbursed to the recipient of the corporate guarantee. Further, it is also clarified that the recipient of the service of providing corporate guarantee shall be eligible to avail the ITC, subject to other conditions specified in the Act and the Rules made thereunder, irrespective of when the loan is actually disbursed to the recipient, and irrespective of the amount of loan actually disbu....
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....ntee shall be the sum of the actual consideration paid/ payable to co-guarantors, if the said amount of total consideration is higher than one per cent of the amount of such guarantee offered. In cases where the sum of the actual consideration is less than one per cent of the amount of such guarantee offered, then GST shall be payable by each co-guarantor proportionately on one per cent of the amount guaranteed by them. For instance, if there are two co-guarantors, A and B, who jointly provide a corporate guarantee to a banking/ financial institution on behalf a related recipient C for Rs. 1 crore, then A and B shall each pay GST on 0.5% of the amount guaranteed. However, if in the above case of A and B providing corporate guarantee j....
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.... monthly basis and when issued for a fixed term of say, five years or ten years as per tenure of the loan? Rule 28(2) of APGST Rules has been amended retrospectively with effect from 26th October 2023, vide G.O.Ms.No.174, Revenue (CT) Department, dated 30.08.2024. Therefore, it is clarified that the value of supply of the service of providing corporate guarantee to a banking company or a financial institution on behalf of a related recipient shall be one per cent of the amount guaranteed per annum or the actual consideration, whichever is higher. Accordingly, the value of supply of the service of providing corporate guarantee to a banking company or a financial institution on behalf of a related recipient for a particular number of....
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.... issue of such corporate guarantee in the first year as well as one very renewal in subsequent years. 7. Whether the benefit of second proviso to sub-rule (1), which states that value declared in invoice is deemed to be the open market value in cases where full input tax credit is available to the recipient of services, is not applicable in cases falling under sub-rule (2)? Proviso has been inserted in sub-rule (2) of Rule 28 of APGST Rules, retrospectively with effect from 26th October 2023 vide G.O.Ms.No.174, Revenue (CT) Department, dated 30.08.2024, similar to that provided in the second proviso to sub-rule (1) of Rule 28 of APGST Rules, to provide the benefit in cases involving supply of service of corporate guarantees provide....