GST – Major Relief to Holding Companies – Interim Stay of PH High Court to GST on Corporate Guarantees

GST on Corporate Guarantees given by holding companies to their subsidiary companies.

Corporate Guarantee given by a holding company to a bank or financial institution for sanction of credit facilities to its subsidiary would be “supply of service” subject to GST.

It appears from the news that the validity of Rule 28(2) of CGST Rules (amended) is also challenged as being arbitrary, discriminatory and confiscatory in nature.

In October, 2023, the Central Board of Indirect Taxes and Taxes (CBIC) amended the Rule 28(2) to provide for 18% GST on 1% of the value of the guarantee or actual consideration whichever is higher.   

Circular dated 27.10.2023 relating to Item No.2 is stayed by the Punjab and Harayana High Court vide  Order dated 3.5.2024 in CWP No.1049 of 2024 of M/s. ACME Cleantech Solutions Pvt Ltd Vs. Union of India and others