2026-VIL-474-BOM
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SGST High Court Cases

GST - Taxability of Corporate Guarantee, Validity of amendment to Rule 28(2) of CGST Rules, 2017, Valuation of supply of corporate guarantee - Petitioner executed corporate guarantees for securing loans taken by its subsidiary companies from banks, without receiving any consideration for the same - Authorities initiated proceedings against the Petitioner for non-payment of GST on the corporate guarantees - Whether the activity of providing corporate guarantee to a group company without any consideration is a taxable supply under the CGST Act, 2017 – HELD – While a bank guarantee is given by a bank on behalf of the customer to the beneficiary bank guaranteeing the payment in case of default by customer, the Corporate Guarantee is a guarantee given by the corporate to cover their own exposure or exposure of some other related entity to their bank, and is in the nature of a contingent contract which becomes enforceable only at the instance of the bank/financial institution in the event of a default - The Supreme Court's decision in Commissioner of CGST & Central Excise vs. Edelweiss Financial Services Ltd. is squarely applicable, wherein it was held that issuance of corporate guarantee to group companies without consideration would not be a taxable service - For an activity to be taxable under the GST Act, there must be a 'provider' and a flow of 'consideration' for the rendering of the service. In the absence of either of these elements, the activity cannot be treated as a taxable supply - In the present case, the corporate guarantees were executed by the petitioner without receiving any consideration, and therefore, the same cannot be considered as a taxable supply of service. It is not the case of the Respondents that the Petitioner is in the business of corporate guarantee on a regular basis - The show cause notice and the proceedings initiated against the petitioner are quashed and set aside. However, the prayer challenging the Constitutional validity of the amendment to Rule 28(2) of the CGST Rules is rejected – The writ petition is partly allowed
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