Bombay High Court To Consider Whether Corporate Guarantees Constitute "Supply" Under GST

On 17 January, the Bombay High Court took up a significant GST question: whether corporate guarantees extended by a holding company to its subsidiaries can be treated as a “supply” liable to tax?

A Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe, while granting interim protection to the petitioner Atlanta Infra Assets Limited, observed that the legal question raised is already engaging the Court's consideration in several pending matters.

The petitions challenge proceedings under the Central Goods and Services Tax Act, 2017, in which the authorities sought to treat corporate guarantees of Rs. 700 crore and Rs. 170 crore given by the petitioner to its subsidiaries Mora Tollways Limited and Atlanta Ropar Tollways Pvt. Ltd. as a taxable supply.

At the outset, the Court noted that the short legal issue is whether a parent company's corporate guarantee to its subsidiaries constitutes a “supply” under GST, even though the controversy arises from an Order-in-Original passed by the authorities.

The Bench observed that a similar issue had already been raised in Schloss HMA Pvt. Ltd. vs Union of India (WP No. 60 of 2025), and that multiple petitions involving the same legal question are pending, with replies filed in some matters and awaited in others.

In view of the overlapping issues, the Court adjourned the matter and directed that all companion matters be listed together to enable a comprehensive hearing on the legal question.

The Bench granted interim protection to the petitioner, directing that if any coercive action is proposed by the Revenue, a seven-day prior notice must be given.

The Court also directed the parties to place on record a list of dates along with propositions of law, and ordered that reply affidavits be served well in advance of the next hearing

Appearance for the Petitioners: Mr.Bharat Raichandani with Mr.Pritesh Kumar i/by UBR Legal Advocates 
Appearance for the Respondent: Ms.Jyoti Chavan, Additional Govt.Pleader, with Mr.Amar Mishra, AGP