2020 (6) TMI 201 - AAR - GST

Tax Implications for Cold Storage Leases: Ruling on GST Exemptions and Taxable Services

In Re: M/s. Gubba Cold Storage Private Limited,

The Authority ruled that tax implications for using leased premises for cold storage of agricultural produce and cold storage leased to private ... Liability of GST - leased premises for cold storage purpose of agriculture produce on leasing charges - Cold storage leased on rent for storage with or without preservation and maintenance to Private Enterprises - seeds/agricultural produce for storage or warehousing on behalf of farmers and traders - HELD THAT:- Sl. No. 54(e) of the N/N. 12/2017-CT (R) dated 28.06.2017 as amended [SGST Not. No. 12/2017-ST(R)dated 29-062017 as amended] provides for exemption from GST in respect of supply of services rendered for storage in relation to the agricultural produce. It is noticed that the term ‘agricultural produce’ has been defined under clause 2(d) of the Notification ibid. Thus, the supply of service for storage or warehouse of goods is exempted if the same is provided in connection with storage or warehousing of ‘agriculture produce’ as defined in clause 2(d) of Not. No. 12/2017-CT (R) dated 28.06.2017 as amended. Further, the notification is with regard to service supplied and not person specific. As such, the entry No. 54(e) is equally applicable for storage services in respect of agricultural produce of both the farmers and the traders. Tax liability on leasing services availed by the applicant with regard to the cold storage facility - HELD THAT:- If the agreement is purely for renting/leasing of the premises of cold storage by one entity to another entity, then the said activity amounts to renting/leasing of immovable property and does not fall within the ambit of storage services.In terms of clause (a) of para 5 of the Schedule II (appended to the GST Act), read with Section 7of the GST Act, renting of immovable property is to be treated as supply of service. Thus, providing non-residential property on rental basis is a supply of service which is classifiable under SAC No.997212. The said supply of service is chargeable to tax @18% under residuary entry at Sl. No. 35 of Not. No. 11/2017-CT (R) dated 28.06.2017 as amended [SGST Not.No. 11/2017-ST (R) dated 29-06-2017 as amended]. Issues:1. Application for Advance Ruling regarding tax implications on supply of certain services.2. Interpretation of tax implications in GST regime for storage services of agricultural produce.3. Determination of tax liability on leasing services for cold storage facilities.Analysis:1. The taxpayer filed an application seeking Advance Ruling on tax implications for specific services under the CGST/TGST Act. The application was admitted after fulfilling necessary requirements and no objections were raised by the jurisdictional officer.2. The taxpayer's queries revolved around tax implications in the GST regime for using leased premises for cold storage of agricultural produce, cold storage leased on rent for storage to private enterprises, and storage or warehousing of seeds/agricultural produce on behalf of farmers and traders. The taxpayer contended that while renting immovable property for commercial purposes attracts GST, services related to storage of agricultural produce are exempt from GST.3. After a personal hearing, the Authority considered the applicant's submissions and agreements with various companies for providing storage services. The Authority referred to Notification No. 12/2017-CT (R) to determine the tax liability. It was noted that services for storage of agricultural produce are exempt from GST as per Sl. No. 54(e) of the notification. The exemption applies to storage services related to agricultural produce as defined in the notification, irrespective of the entity providing the service.4. Regarding tax liability on leasing services for cold storage facilities, it was clarified that renting immovable property is considered a supply of service under GST. Hence, leasing the premises of a cold storage facility falls under renting/leasing of immovable property, taxable at 18% under the residuary entry of the notification.Conclusion:Based on the analysis, the Authority issued the following rulings:1. Tax implications for using leased premises for cold storage of agricultural produce: Taxable at 18%.2. Tax implications for cold storage leased on rent for storage to private enterprises: Taxable at 18%.3. Tax implications for storage or warehousing of seeds/agricultural produce for farmers and traders: Exempted if the service is for storage of 'agricultural produce' as defined in the notification.