In a significant development, the Rajasthan High Court has granted interim relief to Vedanta Ltd., staying recovery proceedings under a GST assessment order that sought to levy GST on Corporate Guarantees (CGs) extended by a parent company to its subsidiaries.
The assessment order was based on CBIC Circular No. 204/16/2023-GST, which clarified that a corporate guarantee issued without consideration between related parties qualifies as a supply of service under Schedule I of the CGST Act and should be valued at 1% of the guaranteed amount under Rule 28(2) of the CGST Rules, 2017.
Vedanta Ltd. challenged:
• The vires of Rule 28(2),
• The legality of the valuation mechanism prescribed in the Circular, arguing it to be onerous and confiscatory.
Taking note of the submissions and the absence of any reply from the GST Department, the Hon’ble Court has directed that no coercive action shall be taken against the petitioner and listed the matter for further hearing on August 7, 2025.
