GST leviable on Warehouse Services used for Packing and Storage of Tea: AAAR [Read Order]

Foreign Service Recipient - Warehouse - Taxscan

The Appellate Authority for Advance Ruling ( AAAR ), Maharashtra has upheld the order of the Advance Ruling Authority and held that the warehouse services used for packaging and storage of tea are not exempted from GST.

The appellants obtained the license for carrying out the business of warehousing under the Bombay Warehousing Act, 1959. They constructed Warehouses at various places including a warehouse at Fursungi, Pune and later, rented out the same to M/s Unilever India Exports Ltd on specific compensation allowed under Bombay Warehousing Act. The appellants approached the Advance Ruling Authority seeking a clarification on the tax liability on the warehousing facilities provided to them.

The appellants contended that the services supplied by the appellant are for agricultural produce and therefore, GST exemption must be allowed.

However, the Advance Ruling Authority denied the benefit to the appellants. Aggrieved by the order, the appellants approached the appellate authority for relief.

The appellate authority upheld the order of the AAR that the stored products are not the agricultural produce as being projected by the appellant.

The Appellate Authority held that “In this regard, it is observed that though the issue was not to decide whether tea is an agricultural produce or otherwise, the Apex court had held that the activity of cultivation and sale of green tea leaves is falling under the agricultural activity and the activity of purchasing tea leaves and manufacture and sale of tea is falling under Business Activity for the purpose of computation of Income Tax under Income Tax Act. Thus, vide this judgment, the Apex court has clearly put the manufacturing activity in relation to the tea which includes the various processes like drying, heating, fermentation, sieving etc. as discussed above, out of the ambit of the agricultural activity and recognized the same as business activity. This clearly exhibits that the manufactured tea is not agricultural produce. Thus, our findings in the present case are in consonance with this very judgment of the Supreme Court. Just because the said judgment does not explicitly cover the issue under the question i.e. “the tea stored in the warehouse is agricultural produce or not”, this does not mean that the ratio of this judgment cannot be applied in the present dispensation. As judgment passed by the Supreme Court grossly covers the facts and circumstances of the case in question, which is the storage of the manufactured tea by the appellant’s client, there is no reason that the same cannot be applied in the present case.”

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