GST Order on Corporate Guarantee to Subsidiaries; Penalty of Rs. 53,15,150 Imposed, Appeal Planned

The company received an Order-in-Original from the Assistant Commissioner of Central Tax, Bengaluru South, raising a GST demand on corporate guarantees given to subsidiaries for April 2021 to October 2023, with interest and penalty.

Mon 28 Sep 2026

Penalty Amount

Rs. 53,15,150/-

Period Involved

April 2021 to October 2023

Order Type

Order-in-Original under Section 74 of CGST Act, 2017 and KGST Act, 2017

Issue

GST demand on corporate guarantees given to subsidiaries

Company Response

No material impact on financials or operations; appeal planned

What happened

The company received an Order-in-Original from the Office of the Assistant Commissioner of Central Tax, South Division-9, Bengaluru South Commissionerate.

• Passed under Section 74 of the CGST Act, 2017 and KGST Act, 2017
• Issue: GST applicability on corporate guarantees provided by the company to its subsidiaries
• Period involved: April 2021 to October 2023
• Order dated September 24, 2026; received by registered email on September 25, 2026

Money involved

• Penalty imposed under the order: Rs. 53,15,150/-
• A GST demand along with applicable interest has also been raised

Why this arises

When a parent company guarantees the borrowings of its subsidiaries, tax authorities have treated this as a service on which GST is payable. The authority has alleged non-payment of GST on such guarantee services for the stated period.

Company's position

• The company states there is no material impact on its financials or operations due to the order.
• It has decided to prefer an appeal against the order before the appropriate appellate authority.

On the timing of the disclosure

The company noted a delay in making this disclosure, attributing it to receipt of the order over the weekend and an inadvertent internal communication gap. It says it has taken measures to strengthen internal processes for timely compliance in future.

For investors, the key takeaways are the quantified penalty of Rs. 53,15,150/-, the fact that the matter will be contested in appeal, and the company's stated view that there is no material financial impact.

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