The CBIC has issued various Circulars on 27th October, 2023, to provide clarification on the issues as discussed in 52nd GST Council Meeting held on 7th October, 2023. 

These Circulars are as under:

1. Clarification relating to admissibility of export remittances received in Special INR Vostro account, as permitted by RBI, for the purpose of consideration of supply of services to qualify as export of services:

Vide Circular No. 202/14/2023-GST, It is clarified that when the Indian exporters, undertaking export of services, are paid the export proceeds in INR from the Special Rupee Vostro Accounts of correspondent bank(s) of the partner trading country, opened by AD banks, the same shall be considered to be fulfilling the conditions of sub-clause (iv) of clause (6) of section 2 of IGST Act, 2017, subject to the conditions/ restrictions mentioned in Foreign Trade Policy, 2023 & extant RBI Circulars and without prejudice to the permissions / approvals, if any, required under any other law.

The Circular can be accessed at https://taxo.online/wp-content/uploads/2023/10/Circular-No-202-14-2023.pdf

2. Clarification regarding the determination of place of supply in various cases:

Vide Circular No. 203/15/2023-GST, clarification on certain issues with respect to determination of place of supply in case of –

i. Supply of service of transportation of goods, including through mail and courier: 

ii. supply of services in respect of advertising sector; and

iii. supply of the “co-location services”.

The Circular can be accessed at https://taxo.online/wp-content/uploads/2023/10/Circular-No-203-15-2023.pdf

3. Clarification on taxability of personal guarantee and corporate guarantee in GST.

Vide Circular No. 204/16/2023-GST, clarification on issues pertaining to the taxability of personal guarantee and corporate guarantee in GST.

i. Personal guarantee by the Director of a company to the bank/ financial institutions for sanctioning of credit facilities to the said company without any consideration :  It is clarified that such activity  is to be treated as a supply of service, even when made without consideration. Rule 28 of Central Goods and Services Tax Rules, 2017 (hereinafter referred to as “CGST Rules”) prescribes the method for determining the value of the supply of goods or services or both between related parties, other than where the supply is made through an agent. In terms of Rule 28 of CGST Rules, the taxable value of such supply of service shall be the open market value of such supply.

ii. Corporate guarantee by a person on behalf of another related person to the bank/ financial institutions, even when made without any consideration:  The activity of providing corporate guarantee is provided by a company to the bank/financial institutions for providing credit facilities to the other company, where both the companies are related, the activity is to be treated as a supply of service between related parties as per provisions of Schedule I of CGST Act, even when made without any consideration.

A new sub-rule 2 in rule 28 of CGST Rules has been inserted vide Notification No. 52/2023 dated 26.10.2023, for determining the taxable value of such supply of services between related persons in respect of providing corporate guarantee. 

iii. Corporate guarantee is provided by a holding company, for its subsidiary company:   The activity of providing corporate guarantee by a holding company to the bank/financial institutions for securing credit facilities for its subsidiary company, even when made without any consideration, is also to be treated as a supply of service by holding company to the subsidiary company, being a related person, as per provisions of Schedule I of CGST Act.

A new sub-rule 2 in rule 28 of CGST Rules has been inserted vide Notification No. 52/2023 dated 26.10.2023, for determining the taxable value of such supply of services by a holding company to a subsidiary company, in the form of providing corporate guarantee on their behalf to a bank/ financial institution in respect of providing corporate guarantee. 

The Circular can be accessed at https://taxo.online/wp-content/uploads/2023/10/Circular-No-204-16-2023.pdf