The Bombay High Court has stayed the circular dated 27th October 2023 which imposed GST on the holding company for providing a corporate guarantee to a subsidiary.
The bench of Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla has observed that the petitioner, Vedanta sought the declaration that the activity of a holding company providing a corporate guarantee to a subsidiary is not in the nature of “supply” and/or “supply of service” taxable under Section 9 of the CGST Act.
The bench found that the issue of taxability of corporate guarantee is a recurring issue. This issue is pending before the several High Courts. The Delhi High Court has in fact granted a stay that no coercive action shall be taken against the Petitioner in case a final assessment order is passed or a demand is created. The Telangana High Court has stayed the effect and operation of the circular dated 27th October 2023. Even the Punjab and Haryana High Court has stayed the effect and operation of the impugned circular 27th October 2023.
The petitioner, Vedanta sought a declaration that the activity of a holding company providing a corporate guarantee to its subsidiary is not in the nature of “supply” and/or “supply of service” taxable under Section 9 of the Central Goods and Services Tax Act, 2017.
A further declaration is sought that the Respondents be restrained from collecting tax under Section 9 of the CGST Act on the activity of providing corporate guarantees to subsidiary companies. A challenge is also laid to the impugned circular dated 27th October 2023 under which the tax is sought to be levied and collected as unconstitutional, ultra vires and violative of Articles 14, 19(1)(g), 246A, 265 and 300A of the Constitution of India.
Since the notice dated 1st February 2024 has been issued to the Petitioner seeking certain information from the Petitioner for the period 1st July 2017 till March 2021 in relation to corporate guarantees given by the Petitioner, the said notice is also challenged.
The department contended that since the Final Audit Report [of the audit conducted] has been issued, the office of the Assistant Commissioner (Circle-VI), CGST Audit-I Commissionerate Pune is not pursuing the matter arising out of the letter dated 1st February 2024 and which is impugned in the Writ Petition. He submitted that since the Respondents are not pursuing the matter further, nothing would survive in the Writ Petition.
The court stayed the effect and operation of the circular dated 27th October 2023.
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Case Details
Case Title: Vedanta Limited Versus The Union of India & Ors.
Case No.: Writ Petition No.4519 Of 2024
Date: 08/01/2025
Counsel For Petitioner: Senior Advocate Rohan Shah
Counsel For Respondent: Y.R. Mishra
