Torrent Power Ltd Vs Union of India & Ors. (Gujarat High Court)
The Gujarat High Court, by common CAV judgment dated 14 August 2026, decided a group of writ petitions concerning GST on corporate guarantees furnished by Holding Companies for their subsidiaries. The petitioners challenged Rule 28(2) of the CGST Rules, 2017, Section 15(4) of the CGST Act, and CBIC Circulars dated 27.10.2023 and 11.07.2024, contending that corporate guarantees furnished without consideration did not constitute taxable supplies and that the deemed valuation of 1% was unconstitutional. The Court held that execution of a corporate guarantee by a Holding Company for its subsidiary constitutes a supply of service under Section 7(1)(c) read with Article 2 of Schedule I and Article 5(e) of Schedule II of the CGST Act, even without consideration. It further held that the subsidiary is the recipient under Section 2(93) and that the corporate guarantee is not an actionable claim excluded by Schedule III. The Court upheld the validity of Rule 28(2) and Section 15(4), but held the expression “whichever is higher” in Rule 28(2) arbitrary and directed that it be read down, permitting valuation based on the actual charge/commission or 1% as applicable. The Court held that the levy under Rule 28(2) cannot operate for corporate guarantees furnished before 26.10.2023, though the levy may apply from that date where guarantees continue. Actions under Section 74 were quashed and set aside, excess GST was directed to be refunded or adjusted, and the relevant portions of the impugned Circulars were set aside to the extent inconsistent with the judgment. The directions were ordered to be implemented within three months, and the writ petitions were allowed in part.
