Skip to main content

🏦💼 GST on Corporate Guarantee


🔍 What is a Corporate Guarantee?

A corporate guarantee is when a company promises (guarantees) to pay back a loan or liability on behalf of another company or related party, usually to a bank or financial institution. 🤝💳

⚖️ GST Implications on Corporate Guarantee

✅ Yes, GST is Applicable!

As per CBIC circular & recent rulings, providing a corporate guarantee by a company (especially to related parties or group companies) is treated as a supply of service under GST.

💰 Taxability Details

💬 Particulars 📋 Details
Nature of Supply Service (even if no consideration is charged)
GST Rate 18%
Valuation (if no charge is taken) 1% of the guaranteed amount or actual consideration – whichever is higher
Tax Mechanism Forward charge (provider pays GST)

🔄 Example Time!

🏢 Company A → gives corporate guarantee for its subsidiary Company B

  • Guaranteed Amount: ₹10 Crores

  • No consideration charged

👉 GST will apply on 1% of ₹10 Cr = ₹10 Lakhs
👉 GST @18% = ₹1.8 Lakhs payable by Company A

🔐 Important Points to Remember

  • 📌 If corporate guarantee is given without consideration, GST still applies based on deemed value (1% rule).

  • 📌 It is treated as a supply between related parties even if no money is involved.

  • 📌 If consideration is charged, GST applies on actual value or 1% of the guaranteed amount, whichever is higher.

⚠️ Exemptions?

❌ No specific exemption for corporate guarantees under GST.
Whether it’s for banks, NBFCs, or related companies – GST applies.

🧾 Invoicing Tip:

  • Raise an invoice under "Financial & Related Services"

  • Mention SAC code 997159 (Guarantee services)

Labels:

Comments

Post a Comment

Popular posts from this blog

❓Sale of Fixed Assets Taxable under GST 🔍

🔍 1️⃣ Is Sale of Fixed Assets Taxable under GST? ✅ Yes , if: Asset was used in the course or furtherance of business You're a registered person under GST 🧾 Treated as a "supply of goods" under Section 7 of CGST Act 🛑 Not taxable if: Sold as personal property Sold by an unregistered person 📈 2️⃣ GST Rate = Same as Applicable Goods Rate 🎯 Depends on the HSN classification of the asset Old computer sold? ➡️ GST @ 18% Vehicle sold? ➡️ GST @ 28% (if applicable) ♻️ 3️⃣ Input Tax Credit (ITC) & Rule 44 – Reversal Logic If ITC was claimed on the capital asset: 📐 On Sale = Pay higher of : GST on transaction value ITC claimed (🔁 reduced by 5% per quarter or 20% per year of use) 🧮 Example : ITC originally availed = ₹60,000 Used for 2 years = 40% reduction (₹24,000) Remaining ITC = ₹36,000 🔁 Pay GST on sale: ➡️ Compare ₹36,000 vs. GST on actual sale value – pay the higher! 💸 4️⃣ Sale Without Consideration = Deemed Supply! 🎁 Trans...
Post a Comment
Read more

💡 Clause 4 of Form 3CD: Indirect Tax Applicability – What Needs to Be Disclosed?

Clause 4 of Form 3CD is your cue to disclose whether the assessee is liable to pay any indirect taxes . This includes GST , and historically, excise duty , service tax , VAT , and even customs duty . But this clause often gets ignored, misunderstood, or under-reported — especially in transitional cases or for assessees with multiple registrations. 🔍 🧾 What Does Clause 4 Require? Clause 4 asks: “Whether the assessee is liable to pay indirect tax like excise duty , service tax , sales tax , goods and services tax , customs duty , etc. If yes, furnish the registration number , GST number or any other identification number allotted.” So, your job is to: ✅ Confirm whether the assessee was liable for any indirect taxes during the relevant financial year ✅ If yes, provide the registration numbers for each applicable law (GSTIN, Importer-Exporter Code, etc.) 🔄 Indirect Tax Categories (Applicable Based on Timeline) Tax Type Applicability GST      ...
Post a Comment
Read more

🚫 E-Invoice Without IRN – Valid or Not?🧾

🔍 What is IRN? IRN = Invoice Reference Number It is a unique 64-character number generated by the GST e-invoice portal (IRP) when you upload your B2B invoice. 📌 E-invoice = Invoice uploaded to IRP + IRN + QR code ❓ What Happens If You Raise an E-invoice Without IRN? ❌ It is NOT a valid tax invoice under GST! As per Rule 48(4) of the CGST Rules: “A registered person shall not issue an invoice in any manner other than by generating IRN from the Invoice Registration Portal (IRP).” ⚠️ Consequences of Not Generating IRN 🚨 Issue ⚡ Impact No IRN or QR code 📄 Invoice is invalid under GST Wrongful ITC to buyer ❌ Buyer cannot claim ITC legally Penalty under GST 💸 Up to ₹25,000 per invoice (Sec 122) Legal disputes with customer 📉 Business risk, reputation issues GSTR-1 mismatch 🔁 Reconciliation problems ✅ When is E-Invoice (with IRN) Mandatory? As of now (FY 2024-25), e-invoicing is mandatory for: 📈 Turnover > ₹5 crore in any financ...
Post a Comment
Read more