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TMI BlogClarification on issues pertaining to taxability of personal guarantee and corporate guarantee in GSTX X X X Extracts X X X X X X X X Extracts X X X X ..... to banks for securing credit facilities for the company. Similarly, clarifications are being sought with respect to taxability and valuation of the activity of providing corporate guarantee by a related person to banks/financial institutions for another related person, as well as by a holding company in order to secure credit facilities for its subsidiary company. 2. In order to ensure uniformity in the implementation of the provisions of law across the field formations, the Commissioner, in exercise of its powers conferred by section 168 of the Assam Goods and Services Tax Act, 2017 (hereinafter referred to as Assam GST Act ), hereby clarifies the issues as under: Sl. No. Issue Cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l guarantee of promoters, directors and other managerial personnel of the borrowing concerns vide Para 2.2.9 of its Circular No. RBI/2021-22/121 dated 9 th November, 2021, which is reproduced below: 2.2.9 Guidelines relating to obtaining of personal guarantees of promoters, directors, other managerial personnel, and shareholders of borrowing concerns Banks should take personal guarantees of promoters, directors, other managerial personnel or major shareholders for the credit facilities granted to corporates, public or private, only when absolutely warranted after a careful examination of the circumstances of the case and not as a matter of course. In order to identify the circumstances under which the guarantee may or may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, brokerage fees or any other form, can be paid to the director by the company, directly or indirectly, in lieu of providing personal guarantee to the bank for borrowing credit limits. As such, when no consideration can be paid for the said transaction by the company to the director in any form, directly or indirectly, as per RBI mandate, there is no question of such supply/ transaction having any open market value. Accordingly, the open market value of the said transaction/ supply may be treated as zero and therefore, taxable value of such supply may be treated as zero. In such a scenario, no tax is payable on such supply of service by the director to the company. There may, however, be cases where the director, who had provided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsidiary company, those two entities also fall under the category of 'related persons'. Hence 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 Assam GST Act. In respect of such supply of services by a person to another related person or by a holding company to a subsidiary company, in form o providing corporate guarantee on their behalf to a bank/ financial institution, the taxable value will be determined as per rule 28 of Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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