The taxability and  valuation  of the  activity  of providing corporate guarantees by a related person has been brought to the fore by insertion of sub-Rule (2) in Rule 28 of the CGST Rules,2017 vide Notification No. 52/2023 –Central Tax dated 26th October 2023.

The extract of Rule 28(2) of the CGST Rules, 2017 is as under :

28(2) Notwithstanding anything contained in sub-rule (1), the value of supply of services by a supplier to a recipient who is a related person, by way of providing corporate guarantee to any banking company or financial institution on behalf of the said recipient, shall be deemed to be one per cent of the amount of such guarantee offered, or the actual consideration, whichever is higher. 

GST @ 18% would be payable on the actual consideration received  for the issuance of the Corporate Guarantee or it will be deemed to 1% of the value of the guarantee offered( if the guarantee is issued without consideration to related party), whichever is higher.

The above valuation Rule 28(2) squarely applies to issuance of corporate guarantees  after 26-10-2023. It does not apply to the Corporate Guarantees issued prior to the date of insertion of the said Rule. However, the insertion of Rule 28(2) only provides the valuation mechanism, notwithstanding the mechanism provided in Rule28(1). 

This It implies that if any such Corporate Guarantee is issued to related parties during the period from 01-07-2017 to 25-10-2023, then the valuation would be governed by the provisions of Rule 28(1) as under :

a)  the open market value of such supply ;(b) if the open market value is not available, then value of supply of goods or services of like kind and quality; (c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order:

The valuation for corporate guarantees issued prior to 26-10-2023 is subject to litigation.

The above Rule 28(2)needs to be read with Circular No. 204/16/2023-GST dated 27th October 2023 clarifying the issues pertaining to taxability of corporate guarantee in GST. It may be noted Personal Gaurantees given by Directors are not taxable, only the Corporate Guarantees are taxable.

• Rule 48 of CGST Rules, 2017 lays down the rules for the applicability and generation of e-invoices.

• As per Rule 48(4) of CGST Rules, notified class of registered persons have to prepare invoice by uploading specified particulars of invoice (in FORM GST INV-01) on Invoice Registration Portal (IRP) and obtain an Invoice Reference Number (IRN).
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• After following above ‘e-invoicing’ process, the invoice copy containing the IRN (with QR Code) is generated and issued by the notified supplier to buyer and this invoice is commonly referred to as ‘e-invoice’ in GST.

Because of the standard e-invoice schema (INV-01), ‘e-invoicing’ facilitates exchange of the invoice document (structured invoice data) between a supplier and a buyer in an integrated electronic format.

The IRN is a unique number, also known as hash, generated by the IRP using a hash generation algorithm, under the e-invoicing system. For every document such as an invoice or debit or credit note to be submitted on the Invoice Registration Portal, a 64-character invoice reference number shall be generated.

This number shall be unique for every invoice raised in a financial year by a GSTIN in the entire GST system. Further, every invoice being issued by supplier to his recipient must contain the IRN.

• As per the latest amendment on e-invoicing, registered persons having aggregate turnover exceeding Rs.5 crore in any preceding financial year are liable to generate e-invoice.

• The provisions of generating e-invoices have been made applicable phase wise based on different aggregate turnover limits. The phase wise applicability along with respective notification is as under : 

As per Section 2(6) of the CGST Act, 2017, "aggregate turnover" means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

• Following category of registered persons are exempted from generation of e invoice irrespective of the turnover limit:

1. 1. An insurer or a banking company or a financial institution, including an NBFC 

• 2. Goods transport agency
• 3. A registered person supplying passenger transportation services 
• 4. A registered person supplying services by way of admission to the exhibition of cinematographic films in multiplex services 
• 5. An SEZ unit (excluded via CBIC Notification No. 61/2020 – Central Tax) 
• 6. Government department and Local authority (excluded via CBIC Notification No. 23/2021 – Central Tax)   

7. Persons registered in terms of Rule 14 of CGST Rules, 2017  (OIDAR)

E-invoicing is applicable in case of Invoices, Debit Notes and Credit Notes.

• E-invoicing is applicable in case of following supplies:
  • - B2B Supplies
  • - SEZ Supplies
  • - Export Supplies
  • - Deemed Exports
• - Supplies to government departments