CBIC Sets 1% GST Valuation Rule for Corporate Guarantees Issued After Oct 26, 2023; Clarifies ITC and Co-guarantor Obligations.

The CBIC clarified taxability and valuation for corporate guarantees between related persons. For guarantees issued or renewed on or after October 26, 2023, a 1% valuation under Rule 28(2) of CGST Rules applies. Prior periods follow previous rules. Valuation is based on the guaranteed amount, not the loan disbursed. Input Tax Credit (ITC) is available regardless of loan disbursal. Co-guarantors pay GST at 1% of their guaranteed amounts. Intra-group guarantees require GST under forward charge by the issuer, while overseas entities use reverse charge. Valuation is 1% per annum or actual consideration, whichever is higher, with exceptions for exports. .....

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