Q.15 Dear Sir,

Company A has 3 directors and has raised substantial term loans and cash credit facility from banks. In lieu of the same, the directors have given their personal guarantee to banks. Similarly, relatives of directors including their spouse, father, son and brother have given their personal guarantees to banks. Further, a company in which one of the directors is a director has also given its corporate guarantee to bank on behalf of the company. No guarantee fee/commission are charged by any of the guarantors. 

In this regard I have the following queries: 

a) Whether GST is payable on guarantees provided by directors even in absence of any consideration? If yes, whether situation would be different if directors are employees and drawing salary? 

b) Whether GST is payable on guarantees by relatives of directors above? Whether they are considered as related persons of company as per section 15 of CGST Act? (As per my understanding GST is payable in absence of consideration only if service is received from related person as per Schedule-1) 

c) Whether GST is payable on corporate guarantee by company in which only 1 director is common? (As per sec 15, only companies which are controlled by same persons are considered as related) 

d) Any other GST implication of above transactions. 

Your views will be appreciated

 Ans. ·       On guarantee by director, GST should not be levied. However, this view will remain subject to litigation.

• On guarantee by relative of director, as these are not covered under definition of related and consideration is not charged. Hence, GST should not be levied.

• If common director is covered under the definition of related person, then GST should be levied evein in the absence of consideration.

Q.14 If any one have gst registration but gst registration has been cancelled due to non filling any return and i after three year again he want registration can he apply new registration with same pan and adhar ? 

Ans. As per the provisions of the Act, there is no restriction on applying for fresh registration with the same PAN, however if there is any demand of tax, interest, penalty or late fees pending the previous registration, the same needs to be paid before applying the fresh registration.

The department may or may not grant the fresh registration until the previous demand is paid.

Q.13 whether input of tractor allowed in the business of interlocking tiles. We will use it as a generator starter as well as loading unloading of tiles. please clarify if is it covered under blocked credit under section 17 (5) or not? 

Ans. In accordance with the provisions laid under Section 17(5) of the CGST Act, 2017, the Input Tax Credit shall not be available in respect of the following:

(a)[motor vehicles for transportation of persons having approved seating capacity of not more than thirteen persons (including the driver), except when they are used for making the following taxable supplies, namely:-

(A) further supply of such motor vehicles; or

(B) transportation of passengers; or

(C) imparting training on driving such motor vehicles;

(aa) vessels and aircraft except when they are used-

       (i) for making the following taxable supplies, namely:-

(A) further supply of such vessels or aircraft; or

(B) transportation of passengers; or

(C) imparting training on navigating such vessels; or

(D) imparting training on flying such aircraft;

        (ii) for transportation of goods;

It is explicit from the aforesaid provision that Input Tax Credit of Motor Vehicle is allowed only if it is used for making specific supplies. In your case it is being used as fixed asset to be used for multiple purpose which includes as generator starter as well as unloading of tiles, therefore it is prima facie a matter of fact that needs to be proved before the authority that the same is used for transportation of goods primarily and the Input Credit should be allowed.