GST Payable On Godown Rent Even For Exempt Agricultural Warehousing: Gujarat AAR

On 21 September, the Gujarat Authority for Advance Ruling (AAR) held that rent paid for hiring godowns from unregistered persons is taxable under GST under reverse charge, even when the godowns are used exclusively for providing exempt storage and warehousing services for agricultural produce.

A Bench comprising SGST Member Sushma Vora and CGST Member Vishal Malani disposed of the application filed by Gujarat State Warehousing Corporation, holding that the hiring of godowns and the subsequent warehousing services are separate supplies. The Authority observed:

“Regardless of whether the godowns, after being hired on payment of rent from registered/unregistered persons, are used for providing exempt warehousing services in relation to agricultural produce for a consideration, the following constitute two separate services and must be examined independently with reference to the notifications applicable to each: (i) hiring of godowns on payment of rent from registered/unregistered persons; and (ii) providing storage and warehousing services for raw agricultural produce in the applicant's own godowns as well as in hired godowns, for a consideration. These two services cannot be read in tandem and must be dealt with separately.”

The Corporation provides storage and warehousing services for agricultural produce, including groundnut, gram, toor and moong. It used both its own and hired godowns, and contended that since the warehousing services provided from the hired godowns were exempt, the rent paid for those premises should also remain outside GST or should not attract GST under reverse charge.

It relied on Entry 54(e) of Notification No. 12/2017-Central Tax (Rate), which exempts services relating to loading, unloading, packing, storage or warehousing of agricultural produce.

The Authority rejected the contention and found that hiring godowns against payment of rent constitutes a supply of service under the CGST Act, independently of the warehousing services subsequently provided by the Corporation.

It noted that the Corporation's storage and warehousing services for agricultural produce, whether provided from its own or hired godowns, are covered by the exemption under Entry 54(e). However, the hiring of godowns falls under Heading 9972 relating to real estate services and is taxable at 18% under the applicable notification.

Further, the Bench held that the reverse-charge position changed pursuant to Notification No. 09/2024-Central Tax (Rate) dated 8 October 2024, which inserted Entry 5AB into the reverse-charge notification with effect from 10 October 2024. Entry 5AB covers renting of any property other than a residential dwelling by an unregistered person to a registered person, subject to the specified conditions.

It stated that “from a plain reading of the above Entry, it is apparently clear that GST at the rate of 18% (9% CGST + 9% SGST) will be payable by the applicant on reverse charge basis in the cases where they are hiring godowns from unregistered persons w.e.f. 10.10.2024. In view of the discussions in paras supra, we find and hold that the GST at the rate of 18% (9% CGST + 9% SGST) is payable by the applicant under reverse charge basis on the rent paid for the godowns hired from unregistered persons..”

The Authority also rejected the Corporation's reliance on an advance ruling of the Tamil Nadu Authority concerning rent received for godowns used for storage of paddy and other agricultural produce. It observed that an advance ruling is binding only on the applicant who sought it and the concerned jurisdictional officer, and therefore declined to apply that ruling to the present case.

Accordingly, the AAR held that GST is applicable on rent paid for hired godowns used for storage and warehousing of raw agricultural produce. Where the godowns are hired from unregistered persons, the rent is taxable under reverse charge from 10 October 2024 at 18%, comprising 9% CGST and 9% SGST.

Counsel for Applicant: Akash Pujara, C.A. and Kaushik K. Dave