Cotton Stored by CCI in Warehouses taxable @18 percent GST

Last updated: 20 October 2021

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The Telangana Authority of Advance Ruling has determined that warehousing services provided to the Cotton Corporation of India (CCI) are subject to an 18% GST. The ruling clarified that cotton processed by CCI on a job work basis is not considered raw cotton for primary market sale, thus not qualifying for exemption under specific GST notifications. Consequently, the rent collected for storing this cotton is taxable.

Court :
Telangana State Authority of Advance Ruling

Brief :
In M/S. Kakkirala Ramesh [FORM GST ARA-01 A.R.Com/22/2018 (GSTIN No. 36ABXPK8604N1ZS) dated September 20, 2021], M/S. Kakkirala Ramesh ("the Appellant") has sought an advance ruling on whether the Godown Rent collected from the Cotton Corporation of India (CCI) is exempted as per the Notification 21/2019 - Central Tax (Rate) (NN. 21/2019) dated September 30, 2019 read with the Circular No.16/16/2017-GST dated November 15, 2017.

Citation :
[FORM GST ARA-01 A.R.Com/22/2018 (GSTIN No. 36ABXPK8604N1ZS) dated September 20, 2021

In M/S. Kakkirala Ramesh [FORM GST ARA-01 A.R.Com/22/2018 (GSTIN No. 36ABXPK8604N1ZS) dated September 20, 2021], M/S. Kakkirala Ramesh ("the Appellant") has sought an advance ruling on whether the Godown Rent collected from the Cotton Corporation of India (CCI) is exempted as per the Notification 21/2019 - Central Tax (Rate) (NN. 21/2019) dated September 30, 2019 read with the Circular No.16/16/2017-GST dated November 15, 2017.

The Honorable Telangana State Authority of Advance Ruling ("AAR") noted that the CCI has 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 exemption under Entry 24 of the modified Notification No. 11/2017 – Central Tax (Rate) dated October 13, 2017 (NN 11/2017). This processing is not meant for the primary market and hence It cannot be treated as raw cotton. Therefore it cannot be claimed that the cotton stored by CCI in the warehouses of the applicant falls under Entry 24B of NN 21/2019.

“The warehousing services rendered by the applicant to CCI do not fall under Entry 24B NN 21/2019 and hence are taxable at the rate of 9% under CGST and SGST each,” the AAR said.

FAQ :

Yes, the Telangana Authority of Advance Ruling has ruled that warehousing services provided to the Cotton Corporation of India (CCI) for storing cotton are taxable at 18% GST.

The ruling stated that the cotton stored by CCI, after being processed in ginning mills on a job work basis, is not considered raw cotton for primary market purposes. Therefore, it does not meet the criteria for exemption under Entry 24B of Notification No. 21/2019.

The applicable GST rate is 9% under CGST and 9% under SGST, making a total of 18%.

No, the exemption under Entry 24B of Notification No. 21/2019 does not apply because the cotton stored by CCI is not treated as raw cotton for the primary market after processing.

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Judgement posted by

Bimal Jain

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FCA, FCS LLB with21 Yrs of Experience inTaxation Indirect and Direct: Education Qualification: B.Com (Hons) Chartered Accountants Company Secretary LLB Qualified SAP FI/CO Consultants Professional Membership: Chairmanof Indirect Tax Committee of PHD Chamber of Commerce Member of Indirec ... Read more

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