Finance Ministry notifies prospective 18% GST on parent company’s guarantees. GST mechanism for corporate guarantee will have a prospective effect, a Finance Ministry notification has made it clear.

As recommended by the GST Council on October 7, the parent company’s corporate guarantee to its subsidiary for a bank loan will attract 18 percent GST, recommended GST Council.

A notification dated October 26 says: “The value of supply of services by a supplier to a recipient who is a related person, by way of providing a corporate guarantee to any banking company or financial institution on behalf of the said recipient,

shall be deemed to be 1% of the amount of such guarantee offered, or the actual consideration, whichever is higher.” This means if the corporate guarantee were ₹100 crore, then ₹18 lakh would be the GST liability.