Q1. What are tax implications in GST regime using leased premises for Cold Storage purpose of agriculture produce on Leasing Charges.
Ans: Taxable @ 18%.
Q2. What are tax implications in GST regime on Cold Storage Leased on rent for storage with or without preservation and maintenance to Private Enterprises?
Ans: Taxable @ 18%.
Q3. What are tax implications in GST regime on Seeds/Agricultural Produce for storage or Warehousing on behalf of Farmers and Traders?
Ans: Exempted if the supply of service is for 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
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, TELANGANA
(Under Section 100(1) of the CGST/TGST Act, 2017, any person aggrieved by this order can prefer an appeal before the Telangana State Appellate Authority for Advance Ruling, Hyderabad, within 30 days from the date of receipt of this Order)
1. M/s. Gubba Cold Storage Private Limited, Flat No.25, P and T Colony, Lane Opp SBI Bank, Trimulgherry, Secunderabad, Telangana, (GSTIN No. 36AAACG7442D1ZV) have filed an application in FORM GST ARA-01 under Section 97(1) of TGST Act, 2017 read with Rule 104 of CGST/TGST Rules, seeking Advance Ruling with regard totax implication in respect of supply of certain services mentioned in their application.
2. At the outset, it is made clear that the provisions of both the CGST Act and the TGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the TGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression ‘GST Act’ would mean CGST Act and TGST Act.
3. It is observed that the queries raised by the applicant fall within the ambit of Section 97 of the GST ACT. The Applicant enclosed copies of challans as proof of payment of Rs. 5,000/- for SGSTand Rs. 5000/- for CGST towards the fee for Advance Ruling. The Applicant has declared that the questions raised in the application have neither been decided by nor are pending before any authority under any provisions of the GST Act. The concerned jurisdictional officer also raised no objection to the admission of the application. The application is therefore, admitted.
4. Brief facts of the case:
The facts, in brief, that were reported by the tax payer in their application are as follows:
a. They are dealing in services which are in the nature of storage and ware housing of agricultural produce, food grains including pulses and rice etc.;
b. They are renting or leasing of agro machinery or vacant land with or without structure incidental to its use, in relation to agricultural produce;
c. They are using leased premises for storage of agricultural produce which is exempted from GST and lessor is insisting to pay GST on lease charges and the lessee is denied to pay GST on lease charges where the lessee is using the premises for storage of agricultural produce only.
5. Questions raised:
With the above background, the applicant raised the following queries:
i) What are tax implications in GST regime using leased premises for cold storage purpose of agriculture produce on leasing charges?
ii) What are tax implications in GST regime on cold storage leased on rent for storage with or without preservation and maintenance to Private Enterprises?
iii) What are tax implications in GST regime on seeds/agricultural produce for storage or warehousing on behalf of farmers and traders?
6. Contention of the tax payer:
The taxpayer have contended that:
1) Supply of services by way of renting immovable property for commercial purpose is a taxable supply under GST law and attracts levy of GST @ 18%;
2) Having said so, services in the nature of storage and ware housing of agricultural produce, food grains including pulses, rice etc., are fully exempted from GST;
3) Further, renting or leasing of agro machinery or vacant land with or without a structure incidental to its use, in relation to agricultural produce would also be exempt.
7. Personal Hearing:
A personal hearing was held on 04-12-2019 at 03.00 P.M. Sri R. Giri Rao, Authorized representative along with Sri Srinivas, General Manager of M/s. Gubba Cold Storage Private Limited appeared for the personal hearing. They reiterated the facts mentioned aboveand sought for clarifications in respect of the queries raised in their application. They submitted, copies of the agreements entered with the following companies relating to taking lease of the cold storage facility and in connection with providing of storage services of agricultural produce:
(i) M/s Nuziveedu Seeds Limited (Lessor) and M/s Gubba Cold Storage Private Limited (Lessee) –with regard to taking lease the cold storage facility;
(ii) M/s Vibhav Cold Storage (Lessor) and M/s Gubba Cold Storage Private Limited (Lessee) –with regard to taking lease the cold storage facility;
(iii) M/s PonalabBiogrowth (P) Ltd (Lessee) and M/s Gubba Cold Storage Private Limited (Lessor) –in connection with providingof cold storage facility for seeds.
8. Discussion & Findings:
8.1 We have considered the submissions made by the applicant in their application for advance ruling as well as at the time of personal hearing. As seen from the application, the applicant appears to have engaged in providing the services which are in the nature of storage of agricultural produce. For this purpose, they took the cold storage facility owned by other entities on lease basis. They produced copies of agreements with various companies in support of the same. Relevant extract of one such agreement provided by the applicant is reproduced below:
8.2 We feel that to determine the tax liability in respect of the services mentioned in the queries, it is pertinent to refer to the Sl. No. 54 of Not. No. 12/2017-CT (R) dated 28.06.2017 as amended [SGST Not. No. 12/2017-ST(R) dated 29-06-2017 as amended] which provides for exemption from GST in respect of certain services in relation to agricultural produce. The same is reproduced below:
|Chapter, Section, Heading, Group or Service Code (Tariff)||Description of services||Rate (percent)||Condition|
|54||Heading 9986||Services relating to 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 or agricultural produce by way of
(a) agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing;
(b) supply of farm labour;
(c) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting, drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk packaging and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market;
(d) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;
(e) loading, unloading, packing, storage or warehousing of agricultural produce;
(f) agricultural extension services :
(g) services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale or purchase of agricultural produce.
(h) services by way of fumigation in a warehouse of agricultural produce.
As can be seen,Sl. No. 54(e) of the aforesaid notification 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. We further find that 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.
Coming to the issue of tax liability on leasing services availed by the applicant with regard to the cold storage facility, we opine 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].
9. In view of the observations stated above, the following rulings are issued :
|Q1. What are tax implications in GST regime using leased premises for Cold Storage purpose of agriculture produce on Leasing Charges.||Ans: Taxable @ 18%.|
|Q2. What are tax implications in GST regime on Cold Storage Leased on rent for storage with or without preservation and maintenance to Private Enterprises?||Ans: Taxable @ 18%.|
|Q3. What are tax implications in GST regime on Seeds/Agricultural Produce for storage or Warehousing on behalf of Farmers and Traders?||Ans: Exempted if the supply of service is for 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|