CBIC issued Circular No.154/10/2021-GST dated 17th June, 2021 in order to clarify various representations questioning the applicability of GST on supply of service by State Govt. to their undertakings or PSUs by way of guaranteeing loans.
GST Council examined the issue in its 43rd meeting held on 28th May, 2021.
Entry No. 34A of Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 exempts “Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions.”
Accordingly, as recommended by the Council, it is re-iterated that guaranteeing of loans by Central or State Government for their undertaking or PSU is specifically exempt under said entry No. 34A.
