NEW DELHI: The GST Council on October 7 is likely to take up the contentious issue of levying GST on the personal guarantees provided by the Directors of the company to the banks in return for obtaining financial assistance. In addition, the tax implication of corporate guarantee in favour of a subsidiary company will also be discussed in the meeting, as per sources.
There is confusion about whether GST should be levied on personal guarantees given by directors. Experts feel the personal guarantee provided by the Director to the company is neither supply of goods nor services, and therefore, should not attract GST.
Abhishek Rastogi, a GST lawyer and founder of Rastogi Chambers said, “There is an absence of activity and hence there is an absence of service and therefore, no GST tax should be applicable on such transactions of personal and corporate guarantee to banks.” Any recovery or show-cause notices issued in this regard will have to cross the constitutional validity, he adds.
The October 7 meeting is also likely to discuss the terms and conditions for the appointment of chairman and members of the GST appellate tribunals. Recently, the government had officially notified the setting up of 31 such appellate tribunals. According to top officials, the first batch of these tribunals will become operational by the end of this year.
However, before they become operational, the centre needs to ensure that the requisite infrastructure is in place and competent members are appointed to these tribunals. The purpose behind establishing these GST appellate tribunals is to provide a dedicated forum for taxpayers to appeal against decisions made by the GST authorities. This move is likely to streamline the dispute resolution process and offer a quicker and more efficient means of addressing GST-related appeals.
Besides this, the council may also deliberate upon making millets exempt from the GST net. Other clarifications related to services like GST imposition on redevelopment projects by builders are also on the agenda list. In a meeting held on August 2, the GST Council approved amendments to the GST laws.
These amendments provide clarity on the taxation of casinos, horse racing, and online gaming activities. Under the approved changes, a GST rate of 28% is applied to the full face value of bets in these three categories.
Agenda of GST Council
The GST Council will discuss levying GST on personal and corporate guarantees provided to banks
The Council will discuss the terms and conditions for appointment of chairman and members of GSTAT
The Council will also be deliberating on exempting millets from GST
Clarifications on imposition of GST for redevelopment projects by builders will also be discussed.