The Gujarat Authority for Advance Ruling (AAR) has held that rent paid for godowns attracts 18% GST even when the premises are used exclusively for storing raw agricultural produce.
The bench comprising Sushma Vora, Member (SGST), and Vishal Malani, Member (CGST) has observed that renting a godown and providing agricultural warehousing services are separate supplies, and the exemption available to the latter does not extend to the rental transaction.
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The corporation provides storage and warehousing services for raw agricultural commodities, including groundnut, gram, toor and moong, on behalf of the National Agricultural Cooperative Marketing Federation of India (NAFED) and the National Cooperative Consumers’ Federation of India (NCCF). These services are undertaken under procurement and farmer welfare schemes.
For its operations, the corporation uses both its own warehouses and godowns hired from registered and unregistered persons. It submitted that the hired premises were used exclusively for storing raw agricultural produce.
The corporation treated its agricultural warehousing services as exempt under Entry 54(e) of Notification No. 12/2017–Central Tax (Rate). Since its output activity was exempt, it had also not discharged GST under the reverse charge mechanism on rent paid for the hired godowns.
Following Notification No. 09/2024–Central Tax (Rate), the corporation began paying GST under reverse charge from December 2024 as a precaution. It subsequently sought clarification on whether the rent was taxable, which charging mechanism applied, and the applicable tax rate.
The authority identified two distinct transactions: the property owners’ supply of godowns to the corporation for rent, and the corporation’s supply of storage and warehousing services to its customers for consideration.
It held that both transactions qualify as supplies under Section 7 of the Central Goods and Services Tax Act, 2017. Their tax treatment must therefore be examined separately under the notifications applicable to each service.
The AAR accepted that the corporation’s storage and warehousing services for the agricultural produce described in the application were exempt under Entry 54(e) of Notification No. 12/2017–Central Tax (Rate).
However, it rejected the argument that this exemption also covered the rent paid for the premises used to provide those services. The exempt nature of the corporation’s warehousing activity did not determine the tax treatment of the separate rental supply.
The authority classified the hiring of godowns under Service Accounting Code 997212, covering rental or leasing services involving own or leased non-residential property.
It held that the rental service falls under Entry 16(iii) of Notification No. 11/2017–Central Tax (Rate) and attracts GST at 18%, comprising 9% CGST and 9% SGST.
Where the godowns are hired from registered persons, the authority explained that GST on the rent is payable by those suppliers under the forward charge mechanism.
For godowns hired from unregistered persons, the authority examined Entry 5AB of Notification No. 13/2017–Central Tax (Rate), inserted through Notification No. 09/2024–Central Tax (Rate), effective from October 10, 2024.
The entry covers renting property other than a residential dwelling by an unregistered supplier to a registered recipient. The authority also noted the subsequent amendment through Notification No. 07/2025–Central Tax (Rate), excluding recipients paying tax under the composition levy.
Since the godowns hired by the corporation were non-residential properties, the AAR held that the corporation must pay 18% GST under reverse charge on rent paid to unregistered owners from October 10, 2024 onwards.
The corporation relied on an advance ruling concerning Lakshmanan Sivalingam/Lena Modern Rice Mill issued by the Tamil Nadu AAR to support its claim for exemption.
The Gujarat authority referred to Section 103 of the CGST Act, explaining that an advance ruling binds only the applicant who sought it and the concerned jurisdictional officer. It also observed that the facts and activities of different applicants may vary.
Accordingly, the cited ruling did not establish an exemption for the corporation’s rental transactions.
The authority answered that rent paid for godowns used exclusively for storing raw agricultural produce is taxable at 18%. It further held that the corporation is liable to discharge GST under reverse charge where the godowns are hired from unregistered persons from October 10, 2024 onwards.
The decision draws a distinction between exempt agricultural warehousing services and the taxable rental of premises used to provide those services.
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