Infra firms ready to battle GST on corporate guarantee in court! As per Sources Notices issued are more than Rs. 1,000 Crores.

Several real estate and infrastructure companies are set to file writ petitions before various High Courts in the coming days, challenging the 18% GST imposed on corporate guarantees issued by parent companies to their subsidiaries and related parties to boost lenders’ confidence

The move follows as many as 50-60 such companies receiving tax notices after the GST Council’s decision in late October to tax these guarantees.

Experts feel the new tax will cause stress in the infrastructure sectors as many firms are heavily dependent on external financing for mega projects. The companies, the sources said, will challenge the logic of taxing corporate guarantee as a service being rendered.

The pleas will also raise questions over the valuation mechanism of taxing such transactions, and, of course, retrospective nature of the current set of notices.

Confirming that close to five dozen companies including some in power and other infrastructure sectors besides real estate firms, have been issued notices seeking tax on corporate guarantees.

A government official said the aggregate tax demands raised via these notices might cross Rs 1,000 crore.