Today’s GST Council meeting is expected to address the steel scrap problem as well

The GST Council is expected to discuss the GST on steel scrap when it meets on Saturday. Other items on the agenda are likely to be the GST exemption for millets in powder form and the GST on bank and corporate guarantees given by holding companies to their subsidiary businesses.

The metal sector has been pushing for the transfer of the 18% GST assessed on steel scrap to a reverse charge mechanism (RCM) basis, where the customer is responsible for paying the tax rather than the supplier.

For instance, the reverse charge method applies to the delivery of raw cotton by farmers to cooperatives.

Reliable sources indicate that the GST Council will likely implement an 18% tax rate on corporate guarantees given by parent corporations to their subsidiary companies in order for such companies to get bank loans.

The GST Council’s legal committee discussed the matter at a number of recent sessions.

According to the law committee, providing a corporate guarantee is a supply that involves a connected party. According to the argument, corporate guarantees should be included by this because supplies fall within the 18% GST level.

The GST Council is also anticipated to discuss whether the promoters’ and directors’ personal guarantees for bank loans to a firm should also be subject to this 18% GST.

The law committee cited the RBI’s directive that no consideration in the form of commissions, brokerage fees, or any other type of payment could be made to the director by the company, directly or indirectly, in lieu of providing a personal guarantee to the bank for borrowing credit limits in the case of a personal guarantee.

This seems to imply that the 18% GST is not always technically applied when personal guarantees are involved.