Applicability of GST on Cold Storage: Key Considerations With the impact of GST on various industries, it is important to understand how the tax regime applies to different operations. Cold storages are used to maintain the perishable goods at controlled temperatures. Understanding the applicability of GST on Cold storage is essential for persons involved in the perishable goods storage business. For cold storage, specific GST Rules are based on the services and products they store. In this blog, we will explore the key considerations essential for business, including tax rates, input tax credit eligibility, exemptions for agricultural goods, and compliance requirements.
Input Tax Credit on GST for Warehouse Construction Under the GST Act, the immovable property is not defined. According to Section 2(52) of the GST Act, all kinds of moveable properties except money and securities are defined as “Goods.” It includes actionable items, growing crops, and grass. Goods are the things that form a part or are attached to the land as long as the agreement is that they will be removed. Therefore, immovable property under the GST Act includes properties other than goods, money, and securities. Since there is no valid explanation of immovable property, you can refer to the allied acts under GST. According to the General Clause Act,1897 Section 3(26), the Immovable properties are:
1. Land
2. Benefits arising from land
3. The things attached to the land
4. The things attached to something fixed to the land
Section 3 of the Transfer of Property Act 1882 implies that the immovable property excludes standing trees, growing crops, or grass. However, as per this Section, the meaning of attached to the ground is:
1. Rooted in the ground, such as trees and shrubs
2. Embedded in the ground, such as walls or buildings
3. Permanently affixed to the ground for the ongoing benefit it serves.
The warehouse under construction is an immovable property. So, there is no Input Tax Credit on the incoming materials for the warehouse construction according to GST Act Section 17(5)(d).
According to Circular No. 58/1/2002- CX , dated 15th January 2002, clause IV, “items erected on the ground and fixed by the foundation cannot be dismantled on the ground without substantial damage to its components, then it is immovable and not excisable goods.” In the case of the warehouse, you cannot dismantle the prefabricated warehouse alone. You should dismantle the floor, an important part of the warehouse, that can cause damage to the foundations. Input Tax Credit on GST on Cold Storage Equipment According to Section 17(5) , “Plant and Machinery” means the equipment, apparatus, and machinery attached to the ground by a foundation or structural support. It is used for making outward supplies of goods or services or both. It includes foundations and structural support but excludes:
1. Any civil constructions, land, or buildings.
2. Telecommunication towers and
3. Pipes that are laid outside the plant area.
Section 17(5), Clause (c), and (d) of CGST law applies only to immovable property. If something is moveable, then the input tax credit is not blocked. Full input tax credit shall be eligible for moveable property as per Section 16 (1) of the CGST Act. Section 17(5), Clause (c), and (d) of CGST law exclude the immovable plant and machinery from its scope. Therefore, input tax credit is available for movable and immovable plants and machinery. You can claim full input tax credit for moveable and immovable plants and machinery. GST on Leased Premises for Cold Storage
The applicant, M/s.Gubba Cold Storage Private Limited was involved in storing and warehousing agricultural produce and food grains. Additionally, It provides the renting and leasing of agricultural machinery or vacant land with or without the structure for agricultural production. They leased premises exempt from GST to store agricultural produce. The landlord insisted on paying the GST on rental charges, which the tenant denied because he used it to store agricultural produce.
The complainant asked for a ruling to understand the GST tax implications on the premises leased for cold storage of agricultural products on leasing charges. He also asked about the GST tax implications on leasing cold storage with or without maintenance to private companies and for agricultural products/seeds storage for farmers and traders.
The body ruled out that 18% GST applies to premises leased out for cold storage of agricultural products on leasing charges. It is added that 18% of GST is applicable to ease cold storage with or without maintenance to private companies. As defined in Clause 2(d) Not. No. 12/2017-CT (R) , GST is exempt if the supply of the service is for storage and storing agricultural produce.
Conclusion The factors that influence the applicability of GST on cold storage are the nature of goods, location, and specific government notifications. The GST is exempted from storing agricultural products in cold storage. For other services, the GST rate is 18%. Additionally, there are benefits for businesses leasing cold storage from Input Tax Credit if they follow the procedure outlined as per the law. The businesses should understand the law clearly and take relevant actions to avoid complexity. FAQs 1. Is GST Applicable on Cold storage Services? Yes, GST applies to cold storage services.
2. What is the GST rate for cold storage services? The GST rate for Cold Storage services is 18%.
3. Is input tax credit available for the materials used for warehouse construction? No, input tax credit is blocked for the materials used for warehouse construction.
4. Is input tax credit available for the plants and machinery in the cold storage? Yes, you can claim full input tax credit for the plants and machines used in the cold storage.
5. Is GST applicable for cold storage that stores agricultural produce? No, the cold storage that stores agricultural produce is exempted from GST.
6. What are the factors influencing the GST rate on cold storage? The factors that influence the GST rate on Cold Storage are
a. Nature of Goods
b. Location
c. Specific Government Notifications
People Also Ask 1. Is GST applicable on cold storage services in India? Yes. GST applies to cold storage services at a standard rate of 18% , unless the storage service is specifically used for agricultural produce , which is exempt from GST under Notification No. 12/2017–CT (Rate) .
2. What is the GST rate for cold storage facilities? The GST rate for cold storage services is 18% , covering warehousing, leasing, and maintenance services. However, if the facility stores agricultural goods such as grains, fruits, or seeds , those services are exempt from GST .
3. Can businesses claim Input Tax Credit (ITC) on cold storage equipment? Yes. Businesses can claim full ITC on plant and machinery used in cold storage, as these are movable assets under Section 17(5) of the CGST Act . However, ITC on warehouse construction materials is not allowed , since immovable property is excluded.
4. Is GST applicable on leasing cold storage premises? Yes. Leasing or renting of cold storage premises is taxable at 18% GST when used for commercial or private storage. But if leased exclusively for storing agricultural produce , it is GST-exempt .
5. Why is cold storage of agricultural produce exempt from GST? Cold storage of agricultural produce is exempt from GST because it supports farmers and the agricultural sector. The exemption encourages proper storage, prevents wastage, and ensures stability in food supply chains.
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