This circular provides clarification on the applicability of GST on services supplied by State Governments to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing loans taken by such entities.

It clarifies that Entry No. 34A of Notification No. 12/2017–Central Tax (Rate) dated 28 June 2017 specifically exempts services supplied by the Central Government, State Government or Union Territory to their undertakings or PSUs in the form of guarantees for loans obtained from banks or financial institutions.

Accordingly, loan guarantee services provided by a State Government to its undertakings or PSUs fall squarely within the scope of this exemption and are not liable to GST. The circular reiterates the position examined and recommended by the GST Council in its 43rd meeting to remove any ambiguity and ensure uniform implementation across field formations.

This clarification aims to provide certainty to State Governments and PSUs regarding GST treatment of such guarantee services.