Torrent Power Ltd. v. Union of India & Ors., Gujarat High Court, R/Special Civil Application Nos. 12175 of 2024, 14 August 2026.

The Gujarat High Court examined the GST treatment of corporate guarantees between related parties under Rule 28(2) of the CGST Rules, 2017. The Court upheld the constitutional validity of Rule 28(2), except the words “whichever is higher”, which were read down as arbitrary.

It held that GST cannot be levied under Rule 28(2) on corporate guarantees furnished before 26 October 2023, although guarantees continuing after that date would attract GST prospectively from 26 October 2023. The Court also upheld the validity of Section 15(4) of the CGST Act and recognized that furnishing a corporate guarantee without explicit consideration can constitute a supply of service under the GST framework. Importantly, the Court held that Section 74 cannot be invoked merely on account of a bona fide dispute regarding the interpretation of GST provisions, in the absence of fraud, wilful misstatement or suppression of facts.

Accordingly, the Section 74 proceedings were quashed, excess GST deposited was directed to be refunded subject to adjustment, and the relevant CBIC circulars were set aside to the extent inconsistent with the judgment.

Last Updated on 9 September, 2026