Renting warehouse space for fruit/vegetable storage is taxable service under GST, not exempt under Notification 11/2017 entry 54(e)

The AAR, Tamil Nadu ruled that renting warehouse space to a lessee for storing fruits and vegetables constitutes a supply of service under GST. However, the activity does not qualify for nil rate GST exemption under Notification No. 11/2017 entry 54(e) as the applicant merely rented immovable property rather than providing storage/warehousing services directly. The lease agreement permitted the lessee to use the property for trading activities including buying/selling fresh produce. The applicant's rental service was deemed an input service for the lessee's trading operations, not covered under the specified exemption entries.

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Issues Involved:
1. Whether the rental income from renting a warehouse to store agricultural produce constitutes a supply of service.
2. Classification of the service provided and the applicable GST rate.

Summary:

Issue 1: Rental Income as Supply of Service
The applicant provides warehouse rental services to a lessee for storing agricultural produce. The ruling confirms that this rental income is considered a consideration for the supply of services under Section 7 of the Central Goods and Services Tax Act, 2017. The applicant's argument that such services should be exempt from GST under Notification No. 12/2017 C.T. (Rate) was examined but found to be inapplicable due to the nature of the lease agreement and the activities conducted by the lessee.

Issue 2: Classification and GST Rate
The applicant sought clarification on whether the service of renting a warehouse for storing agricultural produce falls under the exemption for "loading, unloading, packing, storage or warehousing of agricultural produce" with a Nil GST rate under Sl. No. 54(e) of Notification No. 12/2017 C.T. (Rate). The ruling determined that the rental service provided by the applicant does not qualify for this exemption. Instead, it is classified under "Rental or leasing services involving own or leased non-residential property" with SAC 997212, attracting GST at 18% as per entry Sl. No. 16(iii) of Notification No. 11/2017 C.T. (Rate).

Conclusion:
1. The rental income from renting a warehouse to store agricultural produce is considered a supply of service under Section 7 of the CGST Act, 2017.
2. Such rental services are not exempt under the provisions for agricultural produce storage services and are classified under SAC 997212, attracting an 18% GST rate.

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