The Telangana High Court has served notice to the government regarding a writ petition lodged by M/s GVK Power and Infra Limited,
contesting the Central Board of Indirect Taxes and Customs ( CBIC ) circular’s clarification on the taxability of Personal and Corporate Guarantees under the Goods and Services Tax ( GST ) regime. Filed on February 21, 2024, and registered on the same day, the petitioner, M/s GVK Power and Infra Limited, contended that CBIC circular No. 204/16/2023GST dated October 27, 2023, violates Article 14 of the Constitution, asserting it to be void and illegal.
The petitioner prayed “to issue a writ or order especially in the nature of writ of mandamus declaring Circular No 204/16/2023GST dated 27102023 as being void illegal arbitrary Violative of Article 14 of the Constitution of India and declare the impugned Order in Original No 43/2023GST dated 28112023 passed by the Respondent No. 2 as being void illegal arbitrary violative of Article 14 of the Constitution of India and consequently set aside the same and pass” Justices P. Sam Koshy and N. Tukaramji’s bench has issued notices to the respondents, including the Union of India, the Joint Commissioner of Central Tax, the Assistant Commissioner of Central Tax, the Additional Commissioner, CBIC, among others. The matter is slated for a hearing on May 2, 2024.
R.K. Associates represented the petitioner, while Gadi Praveen Kumar, Deputy Solicitor General of India, appeared for the respondents. The trade and field formations have forwarded representations seeking clarification on certain issues concerning the taxability of providing personal bank guarantees by directors to banks to secure credit facilities for the company. Similar clarifications are sought regarding the taxability and valuation of providing corporate guarantees by related persons to banks/financial institutions for other related persons, as well as by a holding company to secure credit facilities for its subsidiary company. On October 27, 2024, the CBIC board issued a clarification circular based on the abovementioned representations. Nevertheless, GVK Power Company deemed it null, unlawful, and arbitrary, alleging a breach of Article 14 of the Indian Constitution.