Paddy Qualifies as Agricultural Produce; No GST on Rent for Its Storage, Rules Tamil Nadu AAR
Pranav B Prem
The Tamil Nadu Authority for Advance Ruling (AAR) has held that rent received for leasing a godown for the storage of paddy is not liable to Goods and Services Tax (GST), as paddy qualifies as an agricultural produce. The ruling clarifies that when the rented premises are used exclusively for storing paddy, the rental income falls under the exemption provided for services related to storage or warehousing of agricultural produce.
The ruling arose from an application filed by M/s Lena Modern Rice Mill, owned by Lakshmanan Sivalingam, who had rented out a portion of its property to a tenant for use as a godown to store paddy. The tenant refused to pay GST on the rent, prompting the applicant to seek clarity on whether GST was payable on such income under the Central Goods and Services Tax (CGST) Act, 2017 and the Tamil Nadu Goods and Services Tax (TNGST) Act, 2017. The AAR admitted the application and heard both sides.
The applicant submitted that the leased premises, which include a rice mill, warehouse and storage area, were used for storing paddy in its raw form. It was argued that storage of agricultural produce is exempt under Sl. No. 54 of Notification No. 12/2017–Central Tax (Rate) dated 28.06.2017 and, therefore, GST could not be levied on the rent. During the hearing, the authorities called for the rental agreement and invoices relating to the godown rent. The authorised representative assured submission of the documents, but the AAR proceeded on the basis of available submissions and statutory records.
On examining the legal framework, the AAR observed that paddy is the raw, unprocessed grain harvested from the rice plant and still covered with husk. The ruling refers to the statutory interpretation of “agricultural produce,” noting that the term applies when (i) the produce comes from cultivation of plants, (ii) no further processing is done beyond what is normally done by the cultivator to make it marketable in the primary market, and (iii) the processing does not alter the essential characteristics of the product. On this basis, the Authority held that paddy is an agricultural produce because the basic post-harvest activities such as removal of husk do not alter its essential nature and serve only to make it marketable.
The AAR also relied on Sl. No. 24 of Notification No. 11/2017–Central Tax (Rate) and Sl. No. 54 of Notification No. 12/2017–Central Tax (Rate), which prescribe a nil rate of GST for services relating to storage or warehousing of agricultural produce, including loading, unloading, packing and renting of storage premises. Since the godown was rented exclusively for storage of paddy, the service squarely fell under the exemption. The bench noted that “rent received by the applicant towards offering the godown for storage of paddy is not taxable under GST”.
The Authority, comprising C. Thiyagarajan (Member–CGST) and B. Suseel Kumar (Member–SGST), therefore ruled that GST is not leviable on the rent earned from leasing a godown used for storing paddy. The order directs that the exemption applies as long as the premises are used exclusively for storage of paddy, and the applicant is entitled to charge no GST on such rental receipts under the cited exemption notifications.
Applicant's Name: Lakshmanan Sivalingam
