SERIES II No. 30
PUBLISHED BY AUTHORITY
RNI No. GOAENG/2002/6410
Reg. No. RNP/GOA/32/2021-2023
GOVERNMENT OF GOA
Department of Finance
Office of the Commissioner of Commercial Taxes
__
No. CCT/26-4/2023-24/G/2557
Subject: Clarification relating to export of services-
sub-clause (iv) of the Section 2(6) of the
IGST Act, 2017—regarding.
Ref.:
Circular No. 202/14/2023-GST dated 27th
October, 2023 issued under Central Goods
and Services Tax Act, 2017 by the GST Policy
Wing, Central Board of Indirect Taxes and
Customs, Department of Revenue, Ministry of
Finance, Government of India New Delhi.
Circular
(No. 11/2023-24-GST)
The GST Policy Wing, Central Baord of Indirect
Taxes and Customs, Department of Revenue, Ministry
of Finance, Government of India, New Delhi, has
issued the above referred Circular.
For the uniformity in implementation and in
exercise of the powers conferred under Section 168
of the Goa Goods and Services Tax Act, 2017 (Goa
Act 4 of 2017) it is hereby directed that the Said
Circular issued by the GST Policy Wing, Central Board
of Indirect Taxes and Customs, Department of
Revenue, Ministry of Finance, Government of India,
shall be applicable, mutatis mutandis, in
implementation of the Goa Goods and Services Tax
Act, 2017 (Goa Act 4 of 2017). A copy of the above
referred Circular is attached herewith as Annexure.
Difficulty, if any, in implementation of this
Circular may please be brought to the notice of the
undersigned.
Vishant S. N. Gaunekar, Commissioner of State
Taxes, Goa.
Panaji, 30th October, 2023.
Panaji, 30th October, 2023 (Kartika 8, 1945)
ANNEXURE
Circular No. 202/14/2023-GST
F. No. 20/06/22/2023-GST-CBEC
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
New Delhi, Dated the 27th October, 2023.
To,
The Pr. Chief Commissioners/Chief Commissioners/
Principal Commissioners/Commissioners of Central Tax
(All).
The Principal Directors General/Directors
General (All).
Madam/Sir,
Subiect: Clarification relating to export of services-
-sub-clause (iv) of the Section 2(6) of the
IGST Act, 2017—reg.
Various representations have been received
requesting for clarification regarding admissibility
of export remittances received in Special INR Vostro
account, as permitted by RBI, for the purpose of
consideration of supply of services to qualify as
export of services as per the provisions of Clause (6)
of Section 2 of the Integrated Goods & Services Tax
Act, 2017 (hereinafter referred to as the “IGST Act”).
2. The issue has been examined and to ensure
uniformity in the implementation of the provisions
of law across the field formations, the Board, in
exercise of its powers conferred by Section 168 (1)
of the Central Goods & Services Tax Act, 2017
(hereinafter referred to as the “CGST Act”), hereby
clarifies the issue as under:
EXTRAORDINARY
No. 3
Suggestions are welcomed on e-mail: [email protected]
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778
3. Relevant legal provisions:-
3.1 Export of services has been defined under
Clause (6) of Section 2 of IGST Act. As per the said
definition, any supply of services needs to fulfill five
conditions for it to qualify as export of services. Clause (6)
of Section 2 of the IGST Act is reproduced below for
reference:
“(6) “export of services” means the supply of any
service when,—
(i)
the supplier of service is located in India;
(ii) the recipient of service is located outside
India;
(iii) the place of supply of service is outside
India;
(iv) the payment for such service has been
received by the supplier of service in
convertible foreign exchange or in Indian
rupees wherever permitted by the Reserve
Bank of India; and
(v) the supplier of service and the recipient of
service are not merely establishments of a
distinct person in accordance with
Explanation 1 in Section 8;”
3.2 One of the conditions mentioned in sub-clause
(iv) of Section 2(6) of the IGST Act is that the payment
for such service has been received by the supplier of
service in convertible foreign exchange or in Indian
rupees wherever permitted by the Reserve Bank of
India.
3.3 Reference is invited to RBI’s A.P. (DIR Series)
Circular No. 10 dated 11th July, 2022 regarding
International Trade Settlement in Indian Rupees (INR),
vide which it has been clarified that to promote
growth of global trade with emphasis on exports
from India and to support the increasing interest of
global trading community in INR, it has been decided
to put in place an additional arrangement for
invoicing, payment, and settlement of exports/
/imports in INR. Before putting in place this
mechanism, AD banks shall require prior approval
from the Foreign Exchange Department of Reserve
Bank of India, Central Office at Mumbai. Para 3 of the
Circular is reproduced below:
“3. In terms of Regulation 7(1) of Foreign
Exchange Management (Deposit) Regulations,
2016, AD banks in India have been permitted to
open Rupee Vostro Accounts. Accordingly, for
settlement of trade transactions with any country,
AD bank in India may open Special Rupee Vostro
Accounts of correspondent banks of the partner
trading country. In order to allow settlement of
international trade transactions through this
arrangement, it has been decided that:
(a) Indian importers undertaking imports through
this mechanism shall make payment in INR which
shall be credited into the Special Vostro account
of the correspondent bank of the partner country,
against the invoices for the supply of goods or
services from the overseas seller/supplier.
(b) Indian exporters, undertaking exports of
goods and services through this mechanism, shall
be paid the export proceeds in INR from the
balances in the designated Special Vostro account
of the correspondent bank of the partner country.”
3.4 Reference is also invited to Para 2.52 (d) of
chapter related to General Provisions regarding
Imports and Exports of the Foreign Trade Policy
(FTP), 2023, which has come into force from
01-04-2023, which specifies that:
Para 2.52 (d) Invoicing, payment and settlement
of exports and imports is also permissible in INR
subject to compliances as under RBI’s A.P. (DIR
Series) Circular No. 10 dated 11th July, 2022.
Accordingly, settlement of trade transactions in
INR shall take place through the Special Rupee
Vostro Accounts opened by AD banks in India as
permitted under Regulation 7(1) of Foreign
Exchange Management (Deposit) Regulations,
2016, in accordance to the following procedures:
(i) Indian importers undertaking imports
through this mechanism shall make payment
in INR which shall be credited into the Special
Vostro account of the correspondent bank of
the partner country, against the invoices for
the supply of goods or services from the
overseas seller/supplier.
(ii) Indian exporters, undertaking exports
of goods and services through this mechanism,
shall be paid the export proceeds in INR from
the balances in the designated Special Vostro
account of the correspondent bank of the
partner country.
3.5 On perusal of the above, it can be stated
that the condition(s) of sub-clause (iv) of Section 2(6)
of the IGST Act, 2017, can be considered to be
fulfilled when the Indian exporters, undertaking
exports of services, are paid the export proceeds
in INR from the balances in the designated Special
Vostro Account of the correspondent bank of the
partner trading country in terms of Regulation
7(1) of Foreign Exchange Management (Deposit)
Regulations, 2016, as mandated by RBI’s A.P. (DIR
Series) Circular No. 10 dated 11th July, 2022 and
reiterated further in Foreign Trade Policy, 2023.
4. Therefore, it is clarified that when the Indian
exporters, undertaking export of services, are paid
the export proceeds in INR from the Special Rupee
Vostro Accounts of correspondent bank(s) of the
partner trading country, opened by AD banks,
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30TH OCTOBER, 2023
the same shall be considered to be fulfilling the
conditions of sub-clause (iv) of Clause (6) of Section 2
of IGST Act, 2017, subject to the conditions/
/restrictions mentioned in Foreign Trade Policy, 2023
& extant RBI Circulars and without prejudice to the
permissions/approvals, if any, required under any
other law.
5. It is requested that suitable trade notices may
be issued to publicize the contents of this Circular.
Difficulty, if any, in the implementation of this
Circular may be brought to the notice of the Board.
Hindi version will follow.
Sd/- (Sanjay Mangal), Principal Commissioner
(GST).
————
No. CCT/26-4/2023-24/G/2558
Subject: Clarification regarding determination of
place of supply in various cases-regarding.
Ref.: Circular No. 203/15/2023-GST dated 27th
October, 2023 issued under the Central Goods
and Services Tax Act, 2017 by the GST Policy
Wing, Central Board of Indirect Taxes and
Customs, Department of Revenue, Ministry of
Finance, Government of India, New Delhi.
Circular
(No. 12/2023-24-GST)
The GST Policy Wing, Central Board of Indirect
Taxes and Customs, Department of Revenue,
Ministry of Finance, Government of India, New Delhi
has issued the above referred Circular. For the
uniformity in implementation and in exercise of the
powers conferred under Section 168 of the Goa
Goods and Services Tax Act, 2017 (Goa Act 4 of
2017) it is hereby directed that the Said Circular
issued by the GST Policy Wing, Central Board of
Indirect Taxes and Customs, Department of Revenue,
Ministry of Finance, GOI shall be applicable, mutatis
mutandis, in implementation of the Goa Goods and
Services Tax Act, 2017 (Goa Act 4 of 2017). A copy
of the above referred Circular is attached as
Annexure.
Difficulty, if, any, in implementation of this
Circular may please be brought to the notice of the
undersigned.
Given under the seal of this Office.
Vishant S. N. Gaunekar, Commissioner of State
Taxes, Goa.
Panaji, 30th October, 2023.
————
ANNEXURE
Circular No. 203/15/2023-GST
F. No. 20/06/22/2023-GST-CBEC
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
New Delhi, Dated the 27th October, 2023.
To,
The Principal Chief Commissioners/Chief
Commissioners/Principal Commissioners/Commissioners
of Central Tax (All).
The Principal Directors General/Directors
General (All).
Madam/Sir,
Subject: Clarification regarding determination of
place of supply in various cases-reg.
Representations have been received from the
trade and field formations seeking clarification on
certain issues with respect to determination of place
of supply in case of—
i.
supply of service of transportation of goods,
including through mail and courier;
ii. supply of services in respect of advertising
sector; and
iii. supply of the “co-location services”.
2. In order to clarify the issue and to ensure
uniformity in the implementation of the provisions
of law across the field formations, the Board, in
exercise of its powers conferred by Section 168(1)
of the Central Goods and Services Tax Act, 2017
(hereinafter referred to as “CGST Act”), hereby
clarifies the issues as under:
OFFICIAL GAZETTE — GOVT. OF GOA
SERIES II No. 30
(EXTRAORDINARY No. 3)
30TH OCTOBER, 2023
780
Sr. No.
Issue
Clarification
A. Place of supply in case of supply of service of transportation of goods, including through mail and courier
1. Sub-section (9) of Section 13 of Integrated Goods
and Services Tax Act, 2017 (hereinafter referred
to as “IGST Act”) has been omitted vide Section 162
of Finance Act, 2023 which will come into effect
from 01-10-2023. After the said amendment,
doubts have been raised as to whether the
place of supply in case of service of
transportation of goods, including through mail
and courier in cases where location of supplier
of services or location of recipient of services is
outside India, will be determined as per sub-
-section (2) of Section 13 of IGST Act or will be
determined as per sub-section (3) of Section 13
of IGST Act
1.1 Place of supply of services where location of
supplier or location of recipient is outside India
is determined as per Section 13 of the IGST Act.
Sub-section (9) of Section 13 of IGST Act provided
that where one of the supplier of the services or
the recipient of services is located outside India,
the place of supply of services of transportation
of goods, other than by way of mail or courier,
shall be the place of destination of such goods.
The said sub-section has been omitted vide
Section 162 of Finance Act, 2023 which will come
into effect from 01-10-2023. It is hereby clarified
that after the said amendment comes into effect,
the place of supply of services of transportation
of goods, other than through mail and courier, in
cases where location of supplier of services or
location of recipient of services is outside India,
will be determined by the default rule under Section
13(2) of IGST Act and not as performance based
services under sub-section (3) of Section 13 of
IGST Act. Accordingly, in cases where location of
recipient of services is available, the place of
supply of such services shall be the location of
recipient of services and in cases where location
of recipient of services is not available in the
ordinary course of business, the place of supply
shall be the location of supplier of services.
1.2 Further, it is also mentioned that the place of
supply in case of service of transportation of goods
by mail or courier was not covered under the
provisions of sub-section (9) of Section 13 before
the said sub-section was amended/omitted.
Therefore, on the same principles as mentioned
above, the place of supply in case of service of
transportation of goods by mail or courier will
continue to be determined by the default rule
under Section 13(2) of IGST Act i.e., in cases where
location of recipient of services is available, the
place of supply of such services shall be the
location of recipient of services and in cases where
the location of recipient of services is not
available in the ordinary course of business, the
place of supply shall be the location of supplier
of services.
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B. Place of supply in case of supply of services in respect of advertising sector
2. Advertising companies are often involved in
procuring space on hoardings/bill boards
erected and mounted on buildings/land, in
different States, from various suppliers
(“vendors”) for providing advertisement
services to its corporate clients. There may be
variety of arrangements between the
advertising company and its vendors as below:
(i) There may be a case wherein there is supply
(sale) of space or supply (sale) of rights to use
the space on the hoarding/structure
(immovable property) belonging to vendor to
the client/advertising company for display of
their advertisement on the said hoarding/
structure. What will be the place of supply of
services provided by the vendor to the
advertising company in such case?
(ii) There may be another case where the
advertising company wants to display its
advertisement on hoardings/bill boards at
a specific location availing the services of a
vendor. The responsibility of arranging the
hoardings/bill boards lies with the vendor who
may himself own such structure or may be
taking it on rent or rights to use basis from
another person. The vendor is responsible for
display of the advertisement of the
advertisement company at the said location.
During this entire time of display of the
advertisement, the vendor is in possession of
the hoarding/structure at the said location on
which advertisement is displayed and the
advertising company is not occupying the
space or the structure.
In this case, what will be the place of supply
of such services provided by the vendor to the
advertising company?
2.1 It is clarified that the place of supply in the
case supply of services in respect of advertising
sector, in the cases referred in (i) and (ii), shall
be determined as below:
2.2 Place of supply in Case (i): The hoarding/
/structure erected on the land should be
considered as immovable structure or fixture
as it has been embedded in earth. Further, place
of supply of any service provided by way of
supply (sale) of space on an immovable property
or grant of rights to use an immovable property
shall be governed by the provisions of Section
12(3)(a) of IGST Act. As per Section 12(3)(a) of
IGST Act, the place of supply of services directly
in relation to an immovable property, including
services provided by architects, interior
decorators, surveyors, engineers and other
related experts or estate agents, any service
provided by way of grant of rights to use
immovable property or for carrying out or
co-ordination of construction work shall be the
location at which the immovable property is
located. Therefore, the place of supply of service
provided by way of supply of sale of space on
hoarding/structure for advertising or for grant
of rights to use the hoarding/structure for
advertising in this case would be the location
where such hoarding/structure is located.
2.3 Place of supply in Case (ii): In this case, as the
service is being provided by the vendor to the
advertising company and there is no supply
(sale) of space/supply (sale) of rights to use the
space on hoarding/structure (immovable
property) by the vendor to the advertising
company for display of their advertisement on
the said display board/structure, the said
service does not amount to sale of advertising
space or supply by way of grant of rights to use
immovable property. Accordingly, the place of
supply of the same shall not be covered under
Section 12(3)(a) of IGST Act. Vendor is in fact
providing advertisement services by providing
visibility to an advertising company’s
advertisement for a specific period of time on
his structure possessed/taken on rent by him
at the specified location. Therefore, such
services provided by the Vendor to advertising
company are purely in the nature of
advertisement services in respect of which
place of supply shall be determined in terms of
Section 12(2) of IGST Act.
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3. Co-location is a data center facility in which a
business/company can rent space for its own
servers and other computing hardware along
with various other bundled services related to
hosting and Information Technology (IT)
infrastructure.
A business/company who avails the co-location
services primarily seek security and upkeep of its
server/s, storage and network hardware;
operating systems, system software and may
require to interact with the system through a web-
based interface for the hosting of its websites or
other applications and operation of the servers.
In this respect, various doubts have been raised
as to
i. whether supply of co-location services are
renting of immovable property service (as it
involves renting of space for keeping/storing
company’s hardware/servers) and hence the
place of supply of such services is to be
determined in terms of provision of Clause (a)
of sub-section (3) of Section 12 of the IGST
Act which is the location where the
immovable property is located; or
ii. whether the place of supply of such services
is to be determined related to technology
by the default place of supply provision
under sub-section (2) of Section 12 of the
IGST Act as the supply of service is Hosting
and InformationTechnology (IT) Infrastructure
Provisioning services involving providing
services of hosting the servers and related
hardware, security of the said hardware, air
conditioning, uninterrupted power supply,
fire protection system, network connectivity,
backup facility, firewall services, 24 hrs.
monitoring and surveillance service for
ensuring continuous operations of the
servers and related hardware, etc.
3.1 It is clarified that the co-location services are
in the nature of “Hosting and Information
Technology (IT) infrastructure provisioning
services”.
(S. No. 3 of Explanatory notes of SAC-998315).
Such services do not appear to be limited to
the passive activity of making immovable
property available to a customer as the
arrangement of the supply of co-location services
not only involves providing of a physical space
for server/network hardware along with air
conditioning, security service, fire protection
system and power supply but it also involves
the supply of various services by the supplier
related to hosting and information technology
infrastructure services like network connectivity,
backup facility, firewall services, and monitoring
and surveillance service for ensuring continuous
operations of the servers and related hardware,
etc. which are essential for the recipient
business/company to interact with the system
through a web based interface relating to the
hosting and operation of the servers.
3.2 In such cases, supply of co-location services
cannot be considered as the services of supply
of renting of immovable property. Therefore, the
place of supply of the co-location services shall
not be determined by the provisions of Clause (a)
of sub-section (3) of Section 12 of the IGST Act
but the same shall be determined by the default
place of supply provision under sub-section (2)
of Section 12 of the IGST Act i.e. location of
recipient of co-location service.
3.3 However, in cases where the agreement
between the supplier and the recipient is
restricted to providing physical space on rent
along with basic infrastructure, without
components of Hosting and Information
Technology (IT) Infrastructure Provisioning
services and the further responsibility of
upkeep, running, monitoring and surveillance,
etc. of the servers and related hardware is of
recipient of services only, then the said supply
of services shall be considered as the supply of
the service of renting of immovable property.
Accordingly, the place of supply of these
services shall be determined by the provisions
of Clause (a) of sub-section (3) of Section 12 of
the IGST Act which is the location where the
immovable property is located.
C. Place of supply in case of supply of the “co-location Services”
3. Difficulty, if any, in implementation of the above instructions may please be brought to the notice
of the Board. Hindi version would follow.
Sd/- (Sanjay Mangal), Principal Commissioner (GST).
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30TH OCTOBER, 2023
No. CCT/26-4/2023-24/G/2559
Subject:
Clarification on issues pertaining to
taxability of personal guarantee and
corporate guarantee in GST-regarding.
Ref.: Circular No. 204/16/2023-GST dated 27th October,
2023 issued under the Central Goods and
Services Tax Act, 2017 by the GST Policy Wing,
Central Board of Indirect Taxes and Customs,
Department of Revenue, Ministry of Finance,
Government of India, New Delhi.
Circular
(No. 13/2023-24-GST)
The GST Policy Wing, Central Board of Indirect
Taxes and Customs, Department of Revenue,
Ministry of Finance, Government of India, New Delhi
has issued the above referred Circular.
For the uniformity in implementation and in
exercise of the powers conferred under Section 168
of the Goa Goods and Services Tax Act, 2017 (Goa
Act 4 of 2017) it is hereby directed that the Said
Circular issued by the GST Policy Wing, Central
Board of Indirect Taxes and Customs, Department
of Revenue, Ministry of Finance, Government of
India shall be applicable, mutatis mutandis, in
implementation of the Goa Goods and Services Tax
Act, 2017 (Goa Act 4 of 2017). A copy of the above
referred Circular is attached herewith as Annexure.
Difficulty, if any, in implementation of this
Circular may please be brought to the notice of the
undersigned.
Given under the seal of this Office.
Vishant S. N. Gaunekar, Commissioner of State
Taxes, Goa.
Panaji, 30th October, 2023.
ANNEXURE
Circular No. 204/16/2023-GST
F. No. 20/06/22/2023-GST-CBEC
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
New Delhi, Dated the 27th October, 2023.
To,
The Principal Chief Commissioners/Chief
Commissioners/Principal Commissioners/Commissioners
of Central Tax (All).
The Principal Directors General/Directors
General (All).
Madam/Sir,
Subject: Clarification on issues pertaining to
taxability of personal guarantee and
corporate guarantee in GST-regarding.
Representations have been received from the
trade and field formations seeking clarification on
certain issues with respect to taxability of activity
of providing personal bank guarantee by Directors
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 Board, in exercise of its powers
conferred by Section 168 (1) of the Central Goods
and Services Tax Act, 2017 (hereinafter referred to
as “CGST Act”), hereby clarifies the issues as under:
As per Explanation (a) to Section 15 of CGST Act,
the director and the company are to be treated as
related persons. As per Clause (c) of sub-section
(1) of Section 7 of the CGST Act, 2017, read with
S. No. 2 of Schedule I of CGST Act, supply of goods
or services or both between related persons, when
made in the course or furtherance of business,
shall be treated as supply even if made without
consideration. Accordingly, the activity of
providing personal guarantee by the Director to
the banks/financial institutions for securing credit
facilities for their companies is to be treated as a
supply of service, even when made without
consideration.
1. Whether the activity of providing personal
guarantee by the Director of a company to the
bank/financial institutions for sanctioning of
credit facilities to the said company without
any consideration will be treated as a supply of
service or not and whether the same will attract
GST or not
Sr. No.
Issue
Clarification
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2
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Rule 28 of Central Goods and Services Tax Rules,
2017 (hereinafter referred to as “CGST Rules”)
prescribes the method for determining the value
of the supply of goods or services or both between
related parties, other than where the supply is
made through an agent. In terms of Rule 28 of
CGST Rules, the taxable value of such supply of
service shall be the open market value of such
supply.
RBI has provided guidelines for obtaining personal
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 9th 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 not be considered necessary, banks should
be guided by the following broad considerations:
.......................
C. Worth of the guarantors, payment of guarantee
commission, etc.
Where personal guarantees of directors are
warranted, they should bear reasonable proportion
to the estimated worth of the person. The system
of obtaining guarantees should not be used by
the directors and other managerial personnel as a
source of income from the company. Banks should
obtain an undertaking from the borrowing
company as well as the guarantors that no
consideration whether by way of commission,
brokerage fees or any other form, would be paid
by the former or received by the latter, directly or
indirectly. This requirement should be
incorporated in the bank’s terms and conditions
for sanctioning of credit limits. During the periodic
inspections, the bank’s inspectors should verify
that this stipulation has been complied with. There
may, however, be exceptional cases where payment
of remuneration. may be permitted e.g. where
assisted concerns are not doing well and the
existing guarantors are no longer connected with
the management but continuance of their
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2
3
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guarantees is considered essential because the
new management’s guarantee is either not
available or is found inadequate.
.........................................”
Accordingly, as per mandate provided by RBI in
terms of Para 2.2.9 (C) of RBI’s Circular No. RBI/
/2021-22/121 dated 9th November, 2021, no
consideration by way of commission, 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 openmarket 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 the guarantee, is no longer
connected
with
the
management
but
continuance of his guarantee is considered
essential because the new management’s
guarantee is either not available or is found
inadequate, or there may be other exceptional
cases where the promoters, existing directors,
other managerial personnel, and shareholders of
borrowing concerns are paid remuneration/
/consideration in any manner, directly or
indirectly. In all these cases, the taxable value of
such supply of service shall be the remuneration/
/consideration provided to such a person/
/guarantor by the company, directly or indirectly.
Where the corporate guarantee is provided by a
company to the bank/financial institutions for
providing credit facilities to the other company,
where both the companies are related, the activity
is to be treated as a supply of service between
related parties as per provisions of Schedule I of
CGST Act, even when made without any
consideration.
1
2
3
2. Whether the activity of providing corporate
guarantee by a person on behalf of another
related person, or by the holding company for
sanction of credit facilities to its subsidiary
company, to the bank/financial institutions,
even when made without any consideration
will be treated as a taxable supply of service
or not, and if taxable, what would be the
valuation of such supply of services
OFFICIAL GAZETTE — GOVT. OF GOA
SERIES II No. 30
(EXTRAORDINARY No. 3)
30TH OCTOBER, 2023
786
1
2
3
Similarly, where the corporate guarantee is
provided by a holding company, for its subsidiary
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 CGST 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 of providing
corporate guarantee on their behalf to a bank/
/financial institution, the taxable value will be
determined as per Rule 28 of CGST Rules.
Considering different practices being followed
by the field formations and taxpayers in
determining such taxable value, in order to
provide uniformity in practices and ease of
implementation, sub-rule (2) has been inserted in
Rule 28 of CGST Rules vide Notification No. 52/
/2023 dated 26-10-2023, for determining the
taxable value of such supply of services between
related persons in respect of providing corporate
guarantee. Accordingly, consequent to insertion
of the said sub-rule in Rule 28 of CGST Rules, in
all such cases of supply of services by a related
person to another person, or by a holding
company to a subsidiary company, in the form of
providing corporate guarantee on their behalf to
a bank/financial institution, the taxable value of
such supply of services, will henceforth be
determined as per the provisions of the sub-rule
(2) of Rule 28 of CGST Rules, irrespective of
whether full ITC is available to the recipient of
services or not.
It is clarified that the sub-rule (2) of Rule 28 shall
not apply in respect of the activity of providing
personal guarantee by the Director to the banks/
/financial institutions for securing credit facilities
for their companies and the same shall be valued
in the manner provided in S. No. (1) above.
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3. It is requested that suitable trade notices may be issued to publicize the contents of this circular.
4. Difficulties, if any, in implementation of this Circular may please be brought to the notice of the Board.
Hindi version would follow.
Sd/- (Sanjay Mangal), Principal Commissioner (GST).