It further distinguishes genuine storage or warehousing from renting or leasing cold-storage premises. The article discusses the Telangana AAR ruling in Gubba Cold Storage Private Limited, dated 04.01.2020, and the Rajasthan AAR ruling in Sardar Mal Cold Storage & Ice Factory, Ruling No. RAJ/AAR/2018-19/03 dated 11.06.2018. The former is discussed for the distinction between storage services and renting of cold-storage premises, while the latter is discussed for determining whether particular commodities retain the character of agricultural produce. The article also states that taxable cold-storage services are generally classified under SAC 9967 and taxed at 18%, and refers to Rule 42 for reversal of ITC where exempt and taxable storage activities are undertaken.
Every October, as apples are harvested across Kashmir valley , growers face the same decision: sell immediately at harvest-time prices, or pay to store the produce in a controlled-atmosphere (CA) cold store and wait for better rates. A trader in Srinagar storing seed potatoes, a dairy unit in Lassipora storing paneer, and a pharmaceutical distributor from Karan Nagar storing vaccines in refrigerated space would all describe what they are buying as “cold storage.” Yet under GST law, these three transactions can attract entirely different treatment — one Nil-rated, one taxable at 18%, and a third that depends on whether the arrangement is genuinely a storage service or merely a lease of refrigerated space. Getting this distinction right matters for cold-store owners, farmers, Chartered Accountants and GST officers alike, since the law here rests on specific statutory language rather than the everyday meaning of the term “cold storage.”
The exemption and its statutory basis
The exemption for storage of agricultural produce is not found in the CGST Act itself but in a notification issued under Section 11(1) of the CGST Act, 2017, which empowers the Government to exempt goods or services on the recommendation of the GST Council. Acting under this power, the Government issued Notification No. 12/2017-Central Tax (Rate) dated 28.06.2017. Entry 54(e) of this notification exempts “services by way of loading, unloading, packing, storage or warehousing of agricultural produce” from GST altogether, prescribing a Nil rate. TaxGuru’s published version identifies Notification No. 12/2017-Central Tax (Rate) as an exemption notification issued under Section 11(1). :contentReference[oaicite:0]{index=0}
The exemption, however, hinges entirely on what qualifies as “agricultural produce,” and the term is carefully defined — not left to common parlance. The definition appears in the Explanation to Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017 (the notification that also fixes GST rates on services), and is incorporated by reference into Notification No. 12/2017-CT(R) as well. It defines agricultural produce as “any produce out of cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products, on which either no further processing is done or such processing is done as is usually done by a cultivator or producer which does not alter its essential characteristics but makes it marketable for the primary market.” TaxGuru’s reproduced Notification No. 11/2017-CT(R) records its statutory basis under the CGST Act and its original date of 28.06.2017. :contentReference[oaicite:1]{index=1}
Two conditions therefore have to be satisfied together: first, the goods must originate from cultivation or animal rearing; and second, any processing done on them must be no more than what a cultivator ordinarily does at the farm level, without changing the essential character of the produce. Fresh apples straight from the orchard, unprocessed paddy, raw wool, fresh vegetables and unprocessed milk fit this description. The moment goods undergo processing beyond this — apple concentrate, refined sugar manufactured from cane, processed cheese, or packaged juice — they cease to be “agricultural produce” in the eyes of the notification, and storage of such goods falls outside Entry 54(e), becoming a taxable supply.
Taxable cold storage and applicable rate
Where goods stored do not qualify as agricultural produce — pharmaceuticals, chemicals, processed foods, or any manufactured item requiring temperature control — the service is classified as a support service of storage and warehousing under the residuary services heading (SAC 9967) as per Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017, and is generally taxed at 18 percent.
Storage service versus renting of immovable property — the AAR position
A recurring point of confusion for cold-store owners is the difference between (a) providing the service of storing someone else’s goods, and (b) merely renting out cold-storage space or a chamber, leaving the customer to manage their own goods inside it. This distinction was squarely examined by the Telangana Authority for Advance Ruling in the case of Gubba Cold Storage Private Limited, ruling dated 04.01.2020. The applicant, engaged in the business of storing agricultural produce, had itself taken cold-storage premises on lease. The Authority held that renting or leasing of cold-storage premises is, in substance, a renting of immovable property — since the lessor plays no role in the actual storage operation — and is classifiable under HSN 997212, attracting GST at 18%. By contrast, the Authority reaffirmed that genuine storage or warehousing of agricultural produce remains exempt under Entry 54(e) of Notification No. 12/2017-CT(R). The ruling makes clear that the label used in an agreement does not decide classification; what matters is who exercises operational control over the goods being stored.
A related question — which goods actually qualify as agricultural produce for this exemption — was considered by the Rajasthan Authority for Advance Ruling in the case of Sardar Mal Cold Storage & Ice Factory, Ruling No. RAJ/AAR/2018-19/03 dated 11.06.2018. The applicant sought a ruling on whether various goods stored in its cold-storage facility fell within the definition of “agricultural produce” under the Explanation to Notification No. 11/2017-CT(R) and the corresponding entry in Notification No. 12/2017-CT(R). The Authority went item-by-item, holding that goods retaining their original, unprocessed farm character qualified as agricultural produce and were therefore eligible for exemption, while goods that had undergone processing beyond the farm level did not qualify, and cold storage of such goods remained chargeable to GST. The ruling is a useful illustration of how the exemption must be tested commodity-by-commodity rather than assumed for an entire cold-storage business. TaxGuru has separately reported the Sardar Mal ruling as concerning the GST treatment of cold-storage services for agricultural produce. :contentReference[oaicite:2]{index=2}
Why this matters for Kashmir’s cold-store economy
Controlled-atmosphere storage has genuinely changed outcomes for Kashmir’s apple growers, allowing produce to be released to the market months after harvest at substantially better prices. For cold-store owners in this belt, the practical takeaway is threefold: examine what is actually being stored and whether it retains its “agricultural produce” character; determine whether the arrangement is a storage service or effectively a rental of space, since the two are taxed differently under the Gubba Cold Storage ruling; and where both exempt and taxable storage are undertaken, ensure ITC reversal is correctly computed under Rule 42. TaxGuru’s Rule 42 material describes the provision as governing reversal of ITC on inputs and input services where exempt supplies are made. :contentReference[oaicite:3]{index=3} A cold store that charges GST on exempt apple or vegetable storage overburdens growers without legal basis, while one that claims exemption loosely — on rented chamber space or on processed goods — exposes itself to demand proceedings under Sections 73 or 74 of the CGST Act later. The safest course, for taxpayer and tax officer alike, is to apply the statutory test at the point of invoicing, not after.
*****
Aijaz Hussain Malik, JKAS, State Taxes Officer, Circle-C, Srinagar writes about GST compliance.
