CBIC circular and RBI rationale behind personalguarantees
RBI restriction from charging guarantee commissionextended to corporate guarantees as well.
Hon’ble CESTAT Mumbai in a recent decision upheldappellants plea that the holding company is restricted byRBI regulation from charging any commission with respectto the guarantee extended by it to its subsidiaries, hence,the department cannot allege existence of any servicestherein.
While the CBIC circular under GST adheres to the saidprinciple but only in the context of personal guarantees, ifthe rationale behind the RBI restriction is considered, itcan reasonably be argued that such guarantees don’tevolve into any kind of supplies.
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