Gujarat High Court rules on GST for corporate guarantees

The Gujarat High Court has issued a significant ruling regarding the application of Goods and Services Tax (GST) on corporate guarantees in the case of Torrent Power Ltd. v. Union of India and Others. The court addressed whether a corporate guarantee provided by a holding company to support a subsidiary's loans constitutes a taxable supply, even in the absence of a specific fee or commission.

The judgment establishes that while such guarantees can be recognized as a supply under GST law, the valuation of these services must be handled with constitutional fairness. The court ruled that Rule 28(2) should not be applied in a mechanical or retroactive manner, ensuring that valuation remains reasonable and follows proper statutory discipline.