2023 (4) TMI 583 - AAR - GST

Exemption from Service Tax - Services by way of Renting the Warehouse to store Fruits Vegetables - whether renting warehouse to Lessee to store agricultural produce by the Lessee constitute supply of service in terms of Section 7 the Act, if so, whether it is classifiable as loading, unloading, packing, storage or warehousing of agricultural produce with Nil rate of GST vide Sl. No. 54 (e) of Notification No. 11/2017 C.T. (Rate) dated 28.06.2017, if not, its GST rate and SAC? - HELD THAT - Perusal of the recitals of Lease Agreement dated 14.03.2022 between the applicant and the Lessee reveals that Land and building specified in the Schedule 'A' Property has been allowed to be used for buying and selling of fresh fruits, vegetables and related purpose and for any lawful businesses without any restriction and the Lessee is further entitled to assign under lease or sub-lease or grant leave or license of the schedule premises or any part thereof. The applicant has rented the immovable property to the Lessee and the Lessee in turn have used the said property for trading activity in fruits and vegetables - leasing of immovable property by the applicant is an input service for the trading activity of the Lessee. The activities of the applicant and Lessee is not covered under any of the activities specified under entries 24 (e) of Notification No. 11/2017 C.T (Rate) and 54 (e) of Notification No. 12/2017 C.T (Rate) dated 28.06.2017 - In the present application, the applicant has rented the warehouse to the Lessee for storing agricultural produce for trading activity, whereas in the ruling relied by the applicant, the applicant is rendering service of storing and warehousing of agricultural produce covered under entry No.54 (e) of Notification No. 12/2017 C.T (Rate) dated 28.06.2017.

Summary

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.