In a significant GST clarification for the agriculture and warehousing sector, the Authority for Advance Ruling (AAR), Tamil Nadu, has ruled that no Goods and Services Tax (GST) is applicable on rent received for a godown used exclusively for the storage of paddy. The ruling reaffirms that paddy qualifies as “agricultural produce” under the relevant GST exemption notification, thereby making storage-related services eligible for a Nil rate of GST.
Background of the Case
The ruling arose from an application filed by M/s Lena Modern Rice Mill, a rice mill operator based in Tamil Nadu. The applicant had leased out its premises, which included a godown and a machinery area, to a tenant. As per the lease arrangement, the godown portion was specifically meant for storing paddy. A dispute emerged when the tenant refused to pay GST on the rent charged for the godown, claiming that storage of paddy was exempt from GST. To resolve this uncertainty, the applicant approached the Tamil Nadu AAR seeking an advance ruling under Section 97 of the CGST/TNGST Act, 2017, on whether GST was payable on such rental income.
Legal Provision Considered by the Authority
While examining the matter, the AAR referred to Sl. No. 54(e) of Notification No. 12/2017–Central Tax (Rate) dated 28 June 2017. This entry prescribes a Nil rate of GST for services relating to agricultural produce by way of loading, unloading, packing, storage, or warehousing. The core issue before the Authority was to determine whether paddy falls within the definition of “agricultural produce” as provided under the notification.
Meaning of Agricultural Produce Under GST
The Authority observed that agricultural produce generally refers to output obtained from cultivation where either no further processing is carried out or only such minimal processing is undertaken that does not alter the essential characteristics of the produce and is done merely to make it marketable in the primary market. Such produce is usually sold by the cultivator or producer.
Difference Between Paddy and Rice
A crucial part of the ruling was the clear distinction drawn between paddy and rice. The AAR explained that paddy is the raw, harvested grain with its husk intact and is a direct outcome of agricultural cultivation. Any basic processing, such as drying or dehusking, does not change its fundamental nature and only helps in making it market-ready. Rice, on the other hand, is the end product obtained after milling and further processing of paddy and is generally considered outside the scope of “agricultural produce” for GST exemption purposes. In the present case, the godown was used solely for storing paddy and not processed rice.
AAR’s Final Ruling
After detailed analysis, the Tamil Nadu AAR concluded that paddy satisfies all the conditions required to be classified as agricultural produce under the GST exemption notification. Accordingly, services related to storage or warehousing of paddy are covered under the Nil rate of GST. As a result, the rent received for leasing a godown exclusively used for paddy storage does not attract GST. This ruling provides much-needed clarity for rice mill owners, warehouse operators, and businesses involved in agricultural supply chains.
Key Case Details
| Particulars | Details |
|---|---|
| Case Title | M/s Lena Modern Rice Mill |
| Advance Ruling No. | 47/AAR/2025 |
| GSTIN | 33AARPS0595F1ZD |
| Authority | Tamil Nadu Authority for Advance Ruling |
Why This Ruling Matters
This decision strengthens the GST exemption framework for agricultural produce and ensures that storage services for unprocessed crops like paddy remain tax-free. It also highlights the importance of the actual use of premises while determining GST applicability on rental income. For businesses and taxpayers dealing with agricultural commodities, this ruling serves as an important reference point in understanding GST treatment on warehousing and storage services.