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GST – Rajasthan AAR - Section 13(3) of CGST Act, 2017 – Time of Supply, Corporate Guarantee, Periodic Payment – Applicant’s overseas group companies provide Corporate Guarantee to banks and financial institutions for loans taken by the applicant without charging any consideration - Whether GST under reverse charge mechanism on issuance of Corporate Guarantee is payable one-time or on periodical basis, considering that the guarantee has been issued only once and is valid for a specified period without requirement of any periodical renewal – HELD - GST under reverse charge mechanism is required to be paid at one time and not periodically. Since the Corporate Guarantee has been issued only once and is valid for a specified period without any periodical renewal, the time of supply shall be the date of entry in the books of account of the recipient (Indian subsidiary) as per the second proviso to Section 13(3) of the CGST Act, 2017 - GST under reverse charge mechanism on issuance of corporate guarantee is payable one-time and not on periodic basis. The value of supply shall be determined as per the applicable provisions under the CGST Rules – Ordered accordingly - If GST under reverse charge mechanism is to be paid on periodic basis, then to ascertain the value of supply - (a) whether value of loan for which guarantee is given needs to be divided equally amongst the relevant years of guarantee and GST under reverse charge mechanism is to be paid considering 1% of such divided value each year; or (b) whether GST under reverse charge mechanism is payable on 1% of total value of loan in first year, and on 1% of only remaining outstanding value of loan at beginning of each subsequent year – HELD - Since GST is required to be paid at one time and not periodically, the question of determining the value of supply on periodic basis does not arise. However, (a) if the guarantee was executed without consideration prior to 26.10.2023, GST would be payable as per the valuation mechanism under Rule 28(1) of the CGST Rules; and (b) for guarantees executed after 26.10.2023 without consideration, GST under reverse charge mechanism is payable on 1% of the deemed total value of loan as per Rule 28(2) of the CGST Rules, on a one-time basis at the time of execution of the contract.
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