18% GST apply to corporate guarantees between Subsidiaries, Parent & Related parties
GST on service supplied by State or Central Govt. to their undertakings or Public sector undertaking’s by way of guaranteeing loans taken by them -The Central Board of Indirect Taxes and Customs issue explanation that guaranteeing of loans by State & Central Govt for their undertaking or Public sector undertaking is specifically exempt via GSTN issue Entry No. 34A of Notification no. 12/2017- Dated 28.06.
According to The Central Board of Indirect Taxes and Customs order, 18 percentage of Goods and Services Tax will apply to corporate guarantees between subsidiaries & parent and other related parties either on the financial consideration amendment by guarantor for that service, or 1 percentage of value of the guarantee, whichever is higher.
Rajput Jain and associates professional experts explain change in GST rule will have no impact on transactions executed before 26 Oct 2023. The Central Board of Indirect Taxes and Customs had said that in the case of corporate guarantees issued to a bank by a director against loans issue to a company, & where no fee is paid to director for that service, No Goods and Services Tax would applicable. Rajput Jain & Associates experts said there is no clarity on the due timeline of GST payments on corporate guarantees –one-time, monthly or annually.