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The Gujarat High Court has upheld GST on corporate guarantees given by holding companies to their subsidiaries , but has struck down the requirement to pay tax on whichever is higher: 1% of the guarantee amount or the actual consideration.
The Hon’ble Madras High Court in the case of Amman Try Trading Company Private Limited held that the GST demand levied on corporate guarantee furnished without consideration was liable to be quashed due to Revenue’s failure to consider the Petitioner’s submissions based on CBIC’s Circulars
In October 2024, Jindal Stainless challenged a Goods and Services Tax (GST) notice in the Delhi High Court. It was about corporate guarantees issued to related parties by its former group company, Jindal Stainless (Hisar), before their merger in March…
Bombay High Court has stayed the effect and operation of the GST Circular relating to corporate guarantee on a petition filed by Vedanta. Earlier, the High Courts of Telangana and Punjab & Haryana issued similar orders, while the Delhi High Court granted a stay that no coercive action will be taken against the Petitioner in case a final assessment order is passed or a demand is created.
Goods & Services Tax (GST) on corporate-guarantee from overseas group entity payable only one-time, not periodically, Rajasthan’s Authority for Advance Ruling (RAAR) has held. Experts say though the ruling is in line with the Circular, it poses the challenge of paying the full tax upfront for the entire duration of the guarantee.
The recent goods and services tax (GST) notification has clarified that the 1% charge on corporate guarantees between related parties applies yearly, not for each transaction.
With all due respect, it appears that the circular extends beyond the provisions of GST and couldn’t address the inherent nature of guarantee contracts. The following extract may shed some light on the reasoning:
The recent changes in the valuation mechanism for corporate guarantees can serve as a boost for all pending writs before various High Courts. The principle here is straightforward: ‘NO VALUATION MECHANISM, NO TAX
Goods and services tax (GST) will be applied to 1 per cent of corporate guarantee fees on an annual basis and become applicable from October 23, 2023, the government has said.
CBIC is all set to come out with detailed clarification regarding the applicability of GST on corporate guarantees by related parties for loans from banks or financial institutions.