The Karnataka Appellate Authority of Advance Ruling (AAAR), while upholding the order of AAR held that 18% GST is applicable on renting of commercial space in immovable property.
The Appellant, M/s Karnataka Food and Civil Supplies Corporation is a Government of Karnataka undertaking established with a mission to supply food grains and other essential commodities and services to the consumer under the Public Distribution System Scheme and other Government schemes to meet its consumer needs.
The Appellant has entered into an agreement with Central Warehousing Corporation (CWC) for use of storage space at Central Warehouse, Belgaum for storage of Public Distribution System commodities belonging to the Appellant. As per the agreement, CWC has provided storage space of 488 sq metres at Belgaum for a consideration of Rs 126 per sq. metre per month or part thereof on a gross area basis.
CWC was charging GST on the storage charges but the Appellant has not paid the GST portion to CWC. Therefore, CWC has stopped godown operations on account of the non-payment of GST.
In order to obtain clarity on the applicability of GST on the storage charges for CWC storage space, the Appellant sought an advance ruling in respect of the question of whether GST is payable on the Storage charges. Is GST liable to be paid on the entire amount paid as consideration for storage charges or is GST liable to be paid only on the storage of tarahle food commodities like palm oil etc.
The Karnataka Authority for Advance Ruling held that the services provided by the Central Warehousing Corporation to the applicant are covered under renting of commercial space in immovable property and not storage service of goods. The said service is covered under SAC 997212 & is liable to CGST of 9% under entry no. 16 of Notification No.11/2017- Central Tax (Rate) dated June 28, 2017. The said service is also liable to a tax of 9% under the Karnataka Goods and Services Tax Act, 2017 under entry no. 16 of Notification (11/2017) No. FD 48 CSL 2017 dated June 28, 2017.
The Appellate Authority consisting of members D.P. Nagendra Kumar and M.S. Srikar upheld the order passed by the AAR and held that 18% GST is applicable on renting of commercial space in immovable property.
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