GST & Indirect Tax

GST on Corporate Guarantees Between Related Parties

Finin2min GST Desk·June 2026·9 min readCORPORATE GUARANTEE

Corporate guarantees are now a boardroom GST issue. A parent company guaranteeing a subsidiary loan may create a taxable service and a valuation question even when no fee is charged. Finance teams need a contract-wise register and Rule 28 control.

Use the Finin2min GST Services Rate Master to apply these points to your figures or facts.

What changed in practical terms

Rule 28 deals with valuation of supplies between related or distinct persons. Sub-rule (2) specifically deems value for a service by a supplier to a related recipient located in India by providing a corporate guarantee to a banking company or financial institution on behalf of that recipient. Circular 225/19/2024-GST clarifies important questions on date of issue/renewal, loan disbursal and multi-guarantor cases.

For the connected rule, example or next step, see GST on Corporate Guarantees Between Group Companies: Checklist, Due Dates and Common Mistakes.

Corporate guarantee checklist

Question	Why it matters	Document to keep
Who issued the guarantee?	Identifies supplier of service.	Board approval / guarantee deed.
Who benefits from the guarantee?	Identifies related recipient.	Loan sanction and borrower details.
Was it issued or renewed after 26 Oct 2023?	Relevant to Rule 28(2) application.	Guarantee date / renewal letter.
Guarantee amount and period?	Needed for valuation.	Bank guarantee/loan documents.
Is consideration charged?	Compare actual consideration with deemed value.	Invoice/inter-company debit note.

For the connected rule, example or next step, see GST on Import of Services Under RCM.

Valuation guardrails

Rule 28(2) states that the value shall be one per cent of the amount of guarantee offered per annum or actual consideration, whichever is higher. Circular 225 clarifies that the value is based on the amount guaranteed and not on actual loan disbursal, subject to the circular’s specific cases.

Common mistakes

No corporate guarantee register at group level.
Assuming no GST because no guarantee fee is charged.
Missing renewals and amendments.
Not allocating value between multiple guarantors.
Not issuing tax invoice/inter-company debit note where required.

Finin2min publishing checklist before upload

Re-check Rule 28 and Circular 225 before publication.
Do not apply the rule to personal guarantees unless separately analysed.
Cross-link to related-party valuation and RCM articles.

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Make this a monthly finance controlKeep a working paper with invoice data, portal data, source law reference and reviewer sign-off for each GST risk area.

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Official References Used

This draft uses official GST law, rules, GST Council, CBIC/GST portal and e-invoice/e-way bill portal sources only. Before publishing, re-check whether any notification, circular, rule text or portal workflow has changed after the draft date.

For the connected rule, example or next step, see GST Rate and Cess Calculator.

Frequently Asked Questions

Is GST triggered only when a corporate guarantee fee is charged? ▼

No. Related-party valuation rules can apply even where actual consideration is nil or inadequate, subject to Rule 28 and facts.

Is valuation based on loan actually disbursed? ▼

Circular 225 clarifies that corporate guarantee service value is based on the amount guaranteed, not merely actual disbursal, subject to the circular’s facts.

Should old guarantees be reviewed? ▼

Yes. Guarantees issued, renewed or continuing across the effective dates should be reviewed against Rule 28 and CBIC circular clarifications.

Source and review trail

Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.

Primary category: GST & Indirect Tax
Official starting point: www.gst.gov.in