The Central Board of Indirect Taxes and Customs (CBIC) has issued a circular clarifying that the service supplied by State Govt. to their undertakings or PSUs by way of guaranteeing loans taken by them are exempted from GST as per Entry No. 34A of Notification no. 12/2017-Central Tax (Rate) dated 28.06.2017.
The Board issued a circular in the light of various representations received from the stakeholders requesting for clarification regarding applicability of GST on supply of service by State Govt. to their undertakings or PSUs by way of guaranteeing loans and the decision of the GST Council meeting held on 28th May 2021.
“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,” the Board said.
“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,” it clarified.
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