No service tax on corporate guarantees by parent companies to its subsidiaries: Supreme Court

The Supreme Court has ruled that no service tax would be levied on corporate guarantees provided by a parent company to its subsidiaries as there is no consideration involved, resolving a longstanding service tax conflict.

The decision was made in the case of the Commissioner of CGST and Central Excise versus Edelweiss Financial Services, and is expected to resolve past cases related to service tax on corporate guarantees, tax experts said.

“No effort was made on behalf of the revenue to assail the…finding or to demonstrate that issuance of corporate guarantees to group companies without consideration would be a taxable service,” the top court observed while upholding a ruling by the principal commissioner of goods and services tax (GST). “In these circumstances, in view of such conclusive findings in both forums, we see no reason to admit this case,” the court said.

Source a2ztaxcorp