GST On Corp Guarantee Needs Clarification: Experts

THE recent goods and services tax (GST) notification has clarified that the 1% charge on corporate guarantees between related parties applies yearly, not for each transaction.

- MONIKA YADAV

This clarity is in addition to various notifications issued by the Central Board of Indirect Taxes and Customs (CBIC) on July 10 to give effect to the recommendations made in 53rd GST Council meeting held in June.

According to the notification, companies can avoid this charge if they claim full tax credit and deal only with taxable goods and services. However, as per experts, businesses earning even a small portion of exempt income will still face complexities in valuing guarantees for tax purposes. They have sought for further guidance to address issues for businesses with mixed taxable and exempt income.