CBIC clarifying issues pertaining to taxability of personal guarantee and corporate guarantee
- Singhal Jayadev
- Oct 30, 2023
- 1 min read
CBIC issued Circular No. 204/16/2023-GST dated 27th Oct, 2023 - Clarifying issues pertaining to taxability of personal guarantee and corporate guarantee in GST
A. Personal gaurantee given by Director without any consideration, whether GST will be levied or not?
Clarification- As per the RBI guidelines vide Para 2.2.9 of its Circular No. RBI/2021-22/121 dated 9th November, 2021, no consideration by way of commission, brokerage fees or any other form, can be paid to the director by the company, directly or indirectly, in lieu of providing personal guarantee to the bank for borrowing credit limits.
Accordingly, the open market value of the said transaction/ supply may be treated as zero and no tax is payable on such supply of service by the director to the company.
B. Corporate guarantee is provided by a company to the bank for its related company or corporate guarantee is provided by a holding company for its subsidiary company without consideration will be treated as a taxable supply of service or not?
Clarification - The taxable value will be determined as per rule 28 of CGST Rules. In Rule 28, sub rule (2) has been inserted vide Notification No. 52/2023 dated 26.10.2023 wherein one per cent of the amount of such guarantee offered, or the actual consideration, whichever is higher shall be deemed to be the value of supply of such services.
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