26.12.2023: GST on corporate guarantee: Realtors seek revision

Real estate developers have made representation before Finance Minister Nirmala Sitharaman to make amends in the recent circular of imposing 18% GST on corporate guarantees given by related parties, as per government sources. 

“As per developers, 18% GST should be imposed on either actual consideration or 1% of the guarantee amount, whichever is lower,” a highly placed source said. Notably, as per the circular, the consideration value on which the GST will be levied is higher of either the actual payout or 1% of the loan amount.

Besides realty developers, other industry bodies are also in the process of making representation before the government in respect of recent ruling. “Currently the courts are on vacations. We will file the writ petition in the first or second week of January,” another source said. 

Meanwhile, as per government sources, the next GST Council meet may take up the above issue for discussion. The 53rd Council meeting will likely take place in January.

The new rule states that the taxable value of corporate guarantees will be either 1% of the guarantee amount or the actual consideration paid for providing the corporate guarantee, whichever is higher. This means that GST will be applicable on guarantees between related parties, even if the subsidiary company cannot claim full input tax credit. The proposed rule determines the value for taxation purposes based on this valuation. 

Source: The New Indian Express

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