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52nd GST Council Meeting: Ministry of Finance Notifies 18% GST

Published on October 31, 2023
Current Context: The Ministry of Finance has recently notified the applicability of 18% GST on corporate guarantees given by one entity to another in favour of a third party, such as a bank or a financial institution.
52nd GST Council Meeting: Ministry of Finance Notifies 18% GST
  • The new rule applies to transactions involving Corporate Guarantees provided on or after 26th October 2023.
  • This notification was issued following the recommendations of the 52nd GST Council meeting held on 7th October, 2023.
  • A corporate guarantee is a promise made by one entity (the guarantor) to pay the debt or perform the obligation of another entity (the borrower) in case of default.
  • Corporate guarantees are often issued by parent companies for their subsidiaries or by group companies for each other.
  • The notification specifies that the 18% GST will apply to corporate guarantees between parent and subsidiary and other related parties either on the financial consideration charged by the guarantor for that service or 1% of the value of the guarantee, whichever is higher. However, personal guarantees offered by the promoters or directors of the company in their individual capacity shall not attract GST.


Q.1 What is the GST rate on guarantees provided by corporates to their subsidiaries as per the 52nd GST Council Meeting?
a. 5%
b. 12%
c. 18%
d. 28%
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