The Telangana State Authority for Advance Ruling (AAR) has held that Goods and Service Tax exemption is not allowable for warehousing service provided to Cotton Corporations India.
M/s. Kakkirala Ramesh is Providing storage services to different customers and to the Cotton Corporation of India which consists of the storage of ‘Fully Pressed Cotton Bales’. They have submitted that Cotton Corporation of India is objecting to the levy of GST on storage service by relying on Circular No.16/16/2017-GST issued by the Central Warehousing Corporation.
As per the said Notification and Circular, the applicant argues that it is not storing agricultural products such as Raw Cotton, Jute etc, but storing commercially processed products called ‘Fully Pressed Cotton Bales’, hence the that the same is taxable. It was stated that the services by way of storage or warehousing of Raw Cotton are exempted from tax.
The question before the authority was that whether the Godown Rent collected from the CCI is exempted as per the Notification 21/2019 – Central Tax (Rate) Dated 30.09.2019 based on the Circular No.16/16/2017-GST.
A plain reading of the entry suggests that raw vegetable fibres such as cotton, flags, jute etc. are included for exemption under this service head. While exempting the support services to agriculture, hunting, forestry, fishing, mining and utilities under service head 9986 in Notification No. 20/2019 – Central Tax (Rate) dt 30.09.2019, Notification No. 11/2017 was modified to include Entry 24 wherein these activities are defined to include only such activities which are done on farm for making it marketable for the primary market.
The authority bench noted, “It was evident that the CCI purchased raw cotton from farmers in the primary market and then- processed it in ginning mills on a job-work basis. CCI has paid tax on ginning and pressing to the ginning mills as it cannot claim an exemption under Entry 24 of the modified Notification No. 11/2017. Since the processing is not meant for the primary market, it cannot be treated as raw cotton.”
A two-member bench Sri B. Raghu Kiran, IRS, Additional Commissioner (Central Tax) and Sri S. Kasi Visweswara Rao, Additional Commissioner (State Tax) held that “the warehousing services rendered by the applicant to CCI do not fall under Entry 248 Notification No. 21/2019 dated 30.09.2019 and hence are taxable at the rate of 9% under CGST and SGST each.”
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