GST on Storing Processed Tea: No Agricultural Exemption
The Maharashtra AAR ruled that warehousing processed and blended tea is subject to GST and not exempt as agricultural produce.
- Ruling
- Order No. GST-ARA- 30/2017-18/B-38 dated 23.05.2018
- Dated
- 23 May 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Company asked if storing blended and packaged tea is exempt from GST.
- Authority ruled processed tea is not agricultural produce, so GST applies.
- Agricultural exemption under Notification 12/2017 covers only raw farm produce.
- Blending, sorting, and packaging tea into bags counts as manufacturing under GST.
In short
Nutan Warehousing Private Limited rented space to store tea that had been blended, sorted, and packaged into tea bags for export. The company argued that tea comes from a farm, so providing warehouse space for it should be exempt from Goods and Services Tax under Notification No. 12/2017-Central Tax (Rate). The tax authority disagreed, stating that heavy processing converts raw tea into a manufactured commercial product.
What has changed
How it worked before
Many warehouse owners assumed that all tea, whether raw leaves or blended tea bags, qualified as agricultural produce eligible for GST-free storage.
What has changed
The Maharashtra Authority for Advance Ruling held that processed, blended, and packaged tea is not agricultural produce. Under GST rules, agricultural produce only covers items that undergo basic farm-level preparation to become marketable in primary markets. Consequently, warehouse operators providing storage for processed or branded tea must charge GST on their storage fees.
Who this affects
Warehouse operators, logistics providers, and tea exporters who store processed, blended, or packaged tea in commercial godowns.
An example
Apex Logistics rents warehouse space to a firm storing packaged green tea bags for export. Apex wants to know if it can avoid charging GST on storage rent under agricultural produce exemptions. Based on ruling GST-ARA- 30/2017-18/B-38, processed tea bags are manufactured goods, not raw agricultural produce. Apex must charge GST on its warehousing services to remain compliant.
What you should do
Review the goods stored in your warehouse to see if they undergo commercial processing. If you store processed tea or packaged food products, collect and pay GST on your storage fees. Note that this advance ruling directly binds only Nutan Warehousing, but tax officers use its logic during audits of similar businesses.
If you do nothing
If you treat processed tea storage as exempt, tax authorities may treat your warehousing income as unpaid GST during an audit. You will be required to pay the principal tax amount along with mandatory interest and penalties. Because you cannot easily collect past taxes from old clients, these liabilities will come directly out of your profits.
The terms explained
- agricultural produce
- Raw produce from land or animals on which no further processing is done, or only minimal processing by a farmer to make it fit for the primary market.
- advance ruling
- A formal written decision by tax authorities on a specific tax question submitted by a single business.
- manufacture
- Processing raw materials in a way that creates a new commercial product with a distinct name, character, or use.
The ruling in detail
Authority for Advance Ruling
M/s Nutan Warehousing Company Private Limited
Order No. GST-ARA- 30/2017-18/B-38 dated 23.05.2018 · Maharashtra
Questions before the authority
- Whether Exemption provided in serial no. 54 to Notification No. 12/2017 – Central Tax (Rate) is applicable to the activity carried by the company?
Facts
The applicant provided warehousing services to M/s Unilever India Exports Ltd for storing tea, which was procured in bulk, blended, and packed into commercial tea bags prior to export. The applicant sought an advance ruling on whether providing warehousing space for such tea qualifies for GST exemption under Serial No. 54(e) of Notification No. 12/2017-Central Tax (Rate) as storage or warehousing of agricultural produce.
Ruling
| Question | What the authority ruled |
|---|---|
| Exemption under Sr. No. 54 of Notification No. 12/2017-Central Tax (Rate) for warehousing of processed tea | Answered in the negative Processed and packaged tea bags do not constitute agricultural produce |
The Authority for Advance Ruling held that processed, blended, and packaged tea stored in the warehouse does not qualify as **agricultural produce**. Consequently, the exemption under Serial No. 54 of Notification No. 12/2017-Central Tax (Rate) is **not applicable** to the applicant's warehousing services.
Reasoning
The Authority observed that 'agricultural produce' as defined in Notification No. 12/2017-Central Tax (Rate) covers produce on which either no further processing is done or only minimal processing usually done by a cultivator to make it marketable for the primary market is undertaken. The tea stored in the applicant's warehouse undergoes processes such as blending, sorting, filling into tea bags, and secondary packaging, which amounts to manufacture under Section 2(72) of the CGST Act. Relying on CBIC Circular No. 16/16/2017-GST dated 15.11.2017, the AAR held that processed tea factory goods lose the character of primary agricultural produce, disentitling the warehousing service from exemption.
Provisions relied on
- Section 98 of the Central Goods and Services Tax Act, 2017
- Section 2(72) of the Central Goods and Services Tax Act, 2017
- Notification No. 12/2017-Central Tax (Rate) (Serial No. 54)
- Circular No. 16/16/2017-GST dated 15.11.2017
For the practitioner
This ruling establishes that warehousing of **processed, blended, or packaged tea** is taxable and cannot claim exemption reserved for agricultural produce under Notification No. 12/2017-Central Tax (Rate). It underscores that post-harvest processing beyond basic farm-level preparation transforms agricultural produce into manufactured goods, making associated storage services liable to GST.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/mah_aar_30_2017-18_b-38_nutan_ware.pdf
Legibility of the scan, as read: high.
Prepared 18-10-2026.
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