Service of guaranteeing of loans by Govt for their PSU exempt from GST

Central Board of Indirect Taxes & Customs [CBIC] wide Circular No. 154/10/2021-GST dated 17th June 2021 has clarified that service of guaranteeing of loans by Central or State Government for their undertaking or PSU is specifically exempt from GST.

The Circular is given below for reference:

CBIC-190354/36/2021-TRU Section-CBEC
Government of India
Ministry of Finance
Department of Revenue
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North Block, New Delhi,
Dated the 17th June, 2021

To,

The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners/ Commissioner of Central Tax (All) /
The Principal Director Generals/ Director Generals (All)

Madam/Sir,

Sub: GST on service supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans taken by them –reg.

Certain representations have been received requesting for clarification regarding applicability of GST on supply of service by State Govt. to their undertakings or PSUs by way of guaranteeing loans. The issue was examined by GST Council in its 43rd meeting held on 28th May, 2021.

2. Entry No. 34A of Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017 exempts “Services supplied by Central Government, State Government, Union territory to their undertakings or Public Sector Undertakings (PSUs) by way of guaranteeing the loans taken by such undertakings or PSUs from the banking companies and financial institutions.”

3. Accordingly, as recommended by the Council, it is re-iterated that guaranteeing of loans by Central or State Government for their undertaking or PSU is specifically exempt under said entry No. 34A.

4. Difficulty, if any, in the implementation of this circular may be brought to the notice of the Board.

Yours faithfully,

Shashikant Mehta
Technical Officer (TRU)
Email: shashikant.mehta@gov.in