| S. No. | Issue | Clarification |
| 1 | Whether sub-rule (2) of rule 28 of CGST Rules will apply to the corporate guarantees issued prior to insertion of the said sub-rule on 26th October 2023? Also, where intra-group corporate guarantees have been issued before 26th October 2023, which are still in force today, would they be liable to pay GST on “1% of the amount of such guarantee offered” on such guarantees? | The supply of service of providing corporate guarantee to any banking company or financial institution by a supplier to a related recipient was taxable even before the insertion of sub-rule (2) in rule 28 of CGST Rules with effect from 26th October 2023. Rule 28(2) of CGST Rules is only for determination of the value of the taxable supply of providing corporate guarantee and not regarding the taxability of the said supply itself. For corporate guarantees issued or renewed before 26th October 2023, the valuation is to be done as per Rule 28 as it existed then. If issued or renewed on or after 26th October 2023, the valuation is to be done as per Rule 28(2) of CGST Rules. |
| 2 | In cases where the corporate guarantee is provided for a particular amount, whereas the loan is only partly availed or not availed at all by the recipient, what will be the value of supply of corporate guarantee? Also, whether the recipient would be eligible to avail full ITC (Input Tax Credit) even before total loan is disbursed? | The value of supply of the service of providing a corporate guarantee will be calculated based on the amount guaranteed and will not be based on the amount of loan actually disbursed. The recipient of the service is eligible to avail the ITC, subject to other conditions specified in the Act and the Rules, irrespective of when the loan is actually disbursed and the amount actually disbursed. |
| 3 | In the case of takeover of existing loans, since there is merely an assignment of an already issued corporate guarantee, whether GST would be applicable again? | If the loan is taken over by another banking company/financial institution, the said activity of taking over the loan does not fall under the service of providing a corporate guarantee. There will be no impact on GST unless there is a renewal of the existing corporate guarantee. If the takeover is followed/accompanied by issuance of fresh corporate guarantee, then GST would be payable. |
| 4 | Where corporate guarantee is provided by more than one entity / co-guarantor, what is the amount on which GST is payable by each co-guarantor? | In cases where corporate guarantee is provided by multiple related entities, the value of such services shall be the sum of the actual consideration paid/payable to co-guarantors if the amount is higher than 1% of the amount guaranteed. If less, then GST shall be payable by each co-guarantor proportionately on 1% of the amount guaranteed by them. |
| 5 | Where intra-group corporate guarantee is issued, whether GST may be paid by the recipient under reverse charge, as in the absence of actual invoice and payment, the recipient entity may not be able to claim input tax credit of tax paid by the domestic guarantor? | In cases where domestic corporates issue intra-group guarantees, GST is to be paid under the forward charge mechanism, and the invoice is to be issued by the supplier. In cases where such guarantee is provided by the foreign/overseas entity for a related entity located in India, GST would be payable under reverse charge mechanism by the recipient. |
| 6 | Whether the discharge of tax liability on corporate guarantee @ 1% of such guarantee offered is to be done one time or on yearly basis or on monthly basis and when issued for a fixed term of say, five years or ten years as per tenure of the loan? | The value of supply of the service of providing corporate guarantee shall be 1% of the amount guaranteed per annum or the actual consideration, whichever is higher. For a fixed term, it is to be calculated as 1% per year multiplied by the number of years or the actual consideration, whichever is higher. If provided for a period less than a year, the valuation is done proportionately. |
| 7 | Whether the benefit of the second proviso to sub-rule (1), which states that the value declared in the invoice is deemed to be the open market value in cases where full input tax credit is available to the recipient of services, is not applicable in cases falling under sub-rule (2)? | The proviso has been inserted in sub-rule (2) of Rule 28 of CGST Rules to provide the benefit in cases involving the supply of service of corporate guarantees provided between related persons. Where full input tax credit is available to the recipient, the value declared in the invoice shall be deemed to be the value of supply of the said service. |
| 8 | Whether the valuation in terms of Rule 28(2) of CGST Rules will apply to the export of the service of providing corporate guarantee between related persons? | The provisions of sub-rule (2) will not apply in cases where the recipient of the services of providing corporate guarantee between related persons is located outside India. Therefore, the provisions shall not apply to the export of the services of providing corporate guarantee between related persons. |
