Corporate loan guarantee by parent to attract 18% GST

A parent company’s corporate guarantee to its subsidiary for a bank loan will attract 18 per cent GST, the GST Council clarified. However, there will be no GST if a director provides a personal guarantee for a loan from a bank or any financial institution to his/her own company.

The council also recommend an amnesty scheme if an appeal is filed late, besides amending rules for the appointment of president and members of the GST Appellate Tribunal. However, there is no change in recommendation related to the 28 per cent GST on the full face value for online money gaming, casinos and horse racing.

“When the corporate guarantee is given by a director to a company then the value of service will be deemed to be zero, hence no tax,” Revenue Secretary Sanjay Malhotra said at a press conference to announce the recommendations of the 52nd meeting of the GST Council under the Chairpersonship of Finance Minister Nirmala Sitharaman in the national capital.