In re Green Infra Wind Farm Assets Limited (GST AAR Rajasthan)
In the case of In re Green Infra Wind Farm Assets Limited, the Rajasthan GST Authority for Advance Rulings (AAR) examined the taxability of corporate guarantees issued by foreign group companies for loans taken by the applicant, Green Infra Wind Farm Assets Limited. The company, involved in renewable energy development, sought clarity on whether GST under the reverse charge mechanism (RCM) is payable once or periodically on such guarantees. The foreign group company provided the guarantees without charging any consideration, raising questions regarding the treatment of this transaction under GST law.
The AAR considered the issue of time and value of supply for the corporate guarantee. As the guarantee is issued without consideration, the AAR ruled it qualifies as an import of service under GST. Consequently, the tax liability is triggered under Section 13(3) of the CGST Act. The AAR clarified that the GST liability in this case should be paid on a one-time basis when the service is recorded in the recipient’s books of accounts, not periodically. The one-time payment applies because the guarantee is issued once and does not require periodic renewal.
Further, regarding the valuation of supply for GST purposes, the AAR noted the distinction between guarantees executed before and after October 26, 2023. For guarantees executed before this date, GST would be payable based on the valuation rules under Rule 28(1) of the CGST Rules, 2017. For guarantees executed after this date, GST under RCM is payable as 1% of the deemed total loan value at the time of execution. The AAR rejected the notion of paying GST on a periodical basis based on loan value in subsequent years, reinforcing that GST is only payable once at the time of supply.
