ITC UNDER GST

[anurag patil]

IN MY COLD STORAGE I GIVE RENTING SERVICE TO EXMPTED GOODS. CAN I TAKE ITC ON PLANT AND MACHINARY OR I HAVE TO APPLY RULE 43 OF GST RULE

[Sadanand Bulbule]

From Notification No.12/2017-CTR dated 28/06/2017, it can be clearly understood that Cold storage services for Agriculture produce are exempt from tax. So the benefit of ITC is not available on supply of cold storage services to "agricultural produce" as defined under clause 2[d] of the above notification.

 

[Sadanand Bulbule]

Refer Entry 54 (e) of Notificaton No.12/2017 which reads as- loading, unloading, packing, storage or warehousing of agricultural produce. This is classified under heading 9986. Cold storage is not defined under the CGST Act. However the meaning of "warehousing" includes cold storage as well.

[YAGAY and SUN]

As per the provisions of the Central Goods and Services Tax Act, 2017, and the corresponding CGST Rules, where a registered person is engaged exclusively in the supply of exempted goods or services, such person shall not be entitled to avail input tax credit (ITC) on inputs, input services, or capital goods used exclusively for such exempt supply.

In the present case, since the cold storage facility is being rented out solely for the storage of exempted goods, such as agricultural produce which is exempt under Notification No. 12/2017-Central Tax (Rate), the supply qualifies as an exempt supply under Section 2(47) of the CGST Act. Consequently, the plant and machinery used exclusively for providing such exempted service shall not be eligible for input tax credit in terms of Section 17(2) read with Rule 43 of the CGST Rules, 2017.

Furthermore, Rule 43, which provides the manner of determination and reversal of ITC in respect of capital goods used for both taxable and exempt supplies, shall not be applicable in this case, as the entire supply is exempt and not a mixed use of capital goods. Therefore, ITC on plant and machinery used in such exclusively exempted supply shall be disallowed and must not be claimed.

If your cold storage provides renting services exclusively for exempted goods, your eligibility for Input Tax Credit (ITC) is impacted by Section 17 and Rule 43 of the CGST Rules, 2017.

[KASTURI SETHI]

Dear Querist,

You are providing two services, namely, Renting of Immovable Property (taxable) and Cold Storage (Warehousing) Services. (exempted by virtue of agricultural produce). Plant and machinery is being used exclusively for providing exempted service. Hence you cannot avail ITC on plant and machinery (capital goods). No issue of common inputs. No benefit of Rule 43.

The replies of both experts are full of legal force and hence I concur with the same in toto.

Additional Information

DIFFERENCE BETWEEN RENTING OF STORAGE SERVICES AND COLD STORAGE (WAREHOUSING) SERVICES BASED ON AAR GST GUJARAT REPORTED 2018 (6) TMI 1195 - AUTHORITY FOR ADVANCE RULING - GUJARAT - IN RE : RISHI SHIPPING

"6.3 In this regard, we observe that there is difference between ‘storage or warehousing’ service and ‘renting of storage premises’ service. The ‘storage and warehousing service’ provider normally make arrangement for space to keep the goods, loading, unloading and stacking of goods in the storage area, keeps inventory of goods, makes security arrangements and provide insurance cover etc. In a case where a person only rents the storage premises, he does not provide any service such as loading/unloading, stacking, security etc. Mere renting of space cannot be said to be in the nature of service provided for storage or warehousing of goods"

[Shilpi Jain]

Whether the goods you are storing are exempt is not very relevant as is the fact whether the services that you provide are exempt.

It is not necessary that the storage services that you provide will also be exempt if you are storing exempt goods.

Based on the answer to the first question, ans to your second question will depend.

[Shilpi Jain]

Off-late department has started investigating the cold storages to check whether they are in fact providing only storage services or whether it is renting of immovable property services. Latter is liable to GST.

Also they are examining closely whether what is stored is agricultural produce or not. 

AI Summary

Input tax credit denial where cold storage services are exempt; service classification determines ITC eligibility.
If a cold storage provider's supply is an exempt supply (e.g., warehousing of agricultural produce), ITC on plant and machinery used exclusively for that exempt supply is not available; Rule 43's apportionment/reversal for capital goods does not apply because there is no mixed taxable use. By contrast, if the activity is characterized as renting of immovable property (taxable), the ITC analysis differs, so service classification and the nature of goods stored are determinative.