This circular provides detailed clarification on the GST applicability and valuation for the supply of corporate guarantee services between related parties, in line with Rule 28(2) of the CGST Rules, retrospectively amended from 26th October 2023.

It clarifies that such corporate guarantee services are taxable even before 26th October 2023, and the new sub-rule only prescribes valuation norms — not taxability. For guarantees issued or renewed on or after 26th October 2023, the value shall be 1% of the guaranteed amount per annum or the actual consideration, whichever is higher. If the guarantee is for multiple years, GST is payable on the total value upfront; if renewed annually, GST applies each year.

In cases with multiple co-guarantors, tax is apportioned based on each guarantor’s share. For foreign entities providing guarantees to related Indian entities, GST applies under the reverse charge mechanism (RCM). The circular also confirms that where full ITC is available, the invoice value shall be treated as the open market value.

Finally, it specifies that Rule 28(2) does not apply to exports of corporate guarantee services where the recipient is located outside India.