service tax on performance gaurentee

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CA Ritu Dhawan

CA Ritu Dhawan (Querist)
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15 February 2010 hi
i hav an quarry
is service tax is appliacble on performance gaurantee

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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15 February 2010 Are you asking Bank charges for issuing performance guarantee, on that service tax or some other

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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24 July 2025 Regarding **service tax on performance guarantee** in the context of your quarry:

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### What is Performance Guarantee?

Performance Guarantee (PG) is usually a contractual assurance given by a party (like a bank or guarantor) to ensure the completion or performance of certain obligations.

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### Service Tax Applicability:

* **If the performance guarantee is provided by a bank or financial institution** (like a bank guarantee), **service tax is applicable on the commission or fee charged for issuing the guarantee**.
This service falls under the category of **Banking and Financial Services** and is taxable.

* **If the performance guarantee is given as part of your contractual obligation (without charging a separate fee or commission), then no service tax is applicable on the guarantee itself.**

* If you, as a quarry owner, are receiving a performance guarantee from someone, it does not attract service tax on your part unless you provide some taxable service.

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### Summary:

* Service tax applies **on the fee or commission charged for issuing performance guarantee by banks/financial institutions.**
* No service tax on the guarantee itself if given without consideration.
* If you provide a guarantee service for others (charging a fee), then service tax may apply on that fee.

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If you want, I can help you with detailed references or sample clauses. Does that help?

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