Agricultural produce exemption turns on ordinary farm-level processing; value-adding treatment makes storage and warehousing taxable.

For GST exemption on storage or warehousing, the decisive test is whether the goods retain their essential agricultural character after only ordinary farm-level processing for primary-market sale. The AAAR held that cleaning of dust and impurities at farm level could still leave goods as agricultural produce, but drying, polishing, shelling, deshelling, specialised cleaning, grading and packing beyond ordinary cultivation activity altered their character or added marketability and value. On that basis, only the limited portion of Group A remained within the exemption, while Groups B to G fell outside the definition of agricultural produce. Cold storage and warehousing services relating to those goods were therefore taxable.

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Issues: Whether the goods listed in Groups A to G remained agricultural produce so that storage or warehousing services provided in relation to them were exempt or liable to nil rate under the relevant GST notifications.

Analysis: The applicable notifications exempted support services to agriculture, including loading, unloading, packing, storage and warehousing of agricultural produce, and defined agricultural produce as produce on which no further processing is done, or only such processing is done as is usually carried out by a cultivator or producer and which does not alter essential characteristics but makes the produce marketable for the primary market. Applying that test, cleaning of dust and impurities at farm level could retain the character of agricultural produce, but drying, polishing, shelling, deshelling, specialised cleaning, grading, packing and similar processes undertaken beyond ordinary farm-level activity, and which added marketability or value, took the goods outside the definition. On that reasoning, Group A was treated as exempt only where no impermissible processing was shown, while Groups B to G were found to involve processing or value addition that displaced the exemption.

Conclusion: The listed goods, except to the limited extent indicated for Group A, were not treated as agricultural produce for the purpose of the exemption, and the cold storage services in relation to them remained taxable.

Ratio Decidendi: For GST exemption on storage or warehousing, the decisive test is whether the goods retain their essential agricultural character after only such processing as is ordinarily done by a cultivator or producer at farm level for primary-market sale.

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