Rajasthan's AAR ruled GST on overseas corporate guarantees is a one-time payment, not periodic.
Goods & Services Tax (GST) on corporate-guarantee from overseas group entity payable only one-time, not periodically, Rajasthan’s Authority for Advance Ruling (RAAR) has held. Experts say though the ruling is in line with the Circular, it poses the challenge of paying the full tax upfront for the entire duration of the guarantee.
“GST under reverse charge mechanism (RCM) is required to be paid at one time and not periodically for guarantee has been issued only once and is valid for a specified period of time without requirement of any periodical renewal (until the final settlement date of loan contract with Bank/Financial Institution),” RAAR said in a recent ruling.
In this respect, AAR found section 13(3) of GST rules as essential to identify the time of supply. Further it elucidated that where no consideration is charged for CG by the service supplier (overseas related party in this case), the time of supply will be date of entry in the books of account of the service recipient i.e. Indian subsidiary and the GST liability is to be paid at one time basis at the time of supply under RCM. In this vein, it clarified that the question of paying GST periodically will not arise as GST is required to be paid at one time for import of service; Also, expounds on the value of supply.
