The Central Board of Indirect Taxes and Customs (CBIC) has imposed the Goods and Services Tax (GST) on corporate guarantees between entities, such as parent firms and subsidiaries, from Thursday, October 26, 2023. The order comes into effect to implement the decision announced by the GST Council on October 8, 2023.

CBIC has levied an 18% GST on corporate guarantees between parent and subsidiaries and other 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, according to experts, transactions made before October 26, 2023 will not be subject to these modifications. However, experts have raised concerns over the modification, as they have not been able to clarify the periodicity of GST payments on corporate guarantees.

Other issues have also been raised as the new rules come into effect from Thursday, such as how pending disputes will be resolved, and how corporations will comply with the new valuation for future as well as past transactions, a report said, quoting the experts.