Corporate guarantee gst

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Corporate guarantees are generally treated as a taxable supply of services under GST, attracting an 18% rate. However, guarantees provided by banks, financial institutions, and insurance companies are exempt. Recent clarifications specify that the taxable value for guarantees given to banks on behalf of related parties is 1% of the guaranteed amount annually or the actual consideration, whichever is greater, irrespective of input tax credit availability.

SHYAM KRISHNAN K

SHYAM KRISHNAN K (Querist)

23 October 2024 What is the applicability of GST on corporate guarantee, is it compulsory requirement

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

23 October 2024 Corporate guarantees are considered a supply of services under GST. Corporate guarantees provided by a company to its related parties (e.g., subsidiaries, associates) or third parties are considered taxable at 18% rste. Guarantees provided by banks, financial institutions, and insurance companies are exempt from GST.
Circular No. 225/19/2024-GST: This circular clarified that the taxable value of a corporate guarantee provided to a banking company or financial institution on behalf of a related recipient should be calculated at 1% of the guaranteed amount per annum or the actual consideration, whichever is higher.
Notification No. 12/2024-CT: This notification further clarified that the taxable value of a corporate guarantee should be calculated based on the above-mentioned formula, regardless of whether full input tax credit (ITC) is available to the recipient of the services or not.

SHYAM KRISHNAN K

SHYAM KRISHNAN K (Querist)

23 October 2024 As a private limited company, we have given guarantee to another company for availing loan from bank. In this situation is there any gst applicability

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

23 October 2024 Yes, as stated above...

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