Storage or Warehousing Services :

Query :

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The warehouse is located and registered in U.P. and the goods stored in such warehouse belong to a taxable person who is registered in Delhi , what will be the liability of the supplier of service for storage or warehousing of goods in GST ?

Reply:

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(i) Rate of Tax :

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Services of Storage and Warehousing of Goods have not been mentioned specifically in the list of services at 5% rate , or 12% rate , or 18% rate , or 28% rate , such services will fall in the serial no. 9 of the list of services at 18% rate which reads as follows :

“(9) All other services not specified elsewhere ………. 18% ”

(2) Liability :

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• It is pertinent to note that the provisions of Place of supply of services in cases where the supplier and the recipient is in India are embodied in section 12 of the IGST Act , 2017 . Its sub-section (2) embodies following provisions :

” (2) The place of supply of services, except the services specified in sub- sections (3) to (14),––

(a) made to a registered person shall be the location of such person;

(b) made to any person other than a registered person shall be,––

(i) the location of the recipient where the address on record exists; and

(ii) the location of the supplier of services in other cases.”

From the aforesaid provisions it is abundantly clear that in respect of services falling under the ambit of this sub-section if supply is made to a registered person , then the location of such registered person shall be place of supply of such services .

• It is pertinent to note that Sub-section (3) of section 12 of the IGST Act , 2017 embodies following provisions :

“(3) The place of supply of services,––

(a) directly in relation to an immovable property, including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work; or

(b) by way of lodging accommodation by a hotel, inn, guest house, home stay, club or campsite, by whatever name called, and including a house boat or any other vessel; or

(c) by way of accommodation in any immovable property for organising any marriage or reception or matters related thereto, official, social, cultural, religious or business function including services provided in relation to such function at such property; or

(d) any services ancillary to the services referred to in clauses (a), (b) and (c), shall be the location at which the immovable property or boat or vessel, as the case may be, is located or intended to be located:

Provided that if the location of the immovable property or boat or vessel is located or intended to be located outside India, the place of supply shall be the location of the recipient.

Explanation.––Where the immovable property or boat or vessel is located in more than one State or Union territory, the supply of services shall be treated as made in each of the respective States or Union territories, in proportion to the value for services separately collected or determined in terms of the contract or agreement entered into in this regard or, in the absence of such contract or agreement, on such other basis as may be prescribed.”

Now if we go through the provisions embodied in sub-section (3) we find that clause (a) envisages services directly related to immovable property and its elongation by words “including services provided by architects, interior decorators, surveyors, engineers and other related experts or estate agents, any service provided by way of grant of rights to use immovable property or for carrying out or co-ordination of construction work” clarifies its periphery . This clause may not include storage or warehousing of goods .

Clause (b) is related to services by way of lodging accommodation of various kinds of immovable properties . Since it is an specific entry and does not include words ” services relating to storage or warehousing of goods,” this automatically by inference cannot include such activity .

Clause (c) is related to services by way of accommodation for various events such as marriage, official, social, cultural, religious or business functions etc. and again it does not include words ” services relating to storage or warehousing of goods,” so these words can not be included in this clause by any inference because this clause is specific .

Clause(d) is related to services which are ancillary to the services mentioned in clause (a), (b) and (c) thus this too by virtue of its construction cannot include ” services relating to storage or warehousing of goods,”

Thus sub-section (3) does not include services of storage or warehousing of goods.

Other services included in sub-section (4) to (13) also do not include ” services relating to storage or warehousing of goods,”

Thus it is significant to note that the services of storage or warehousing of goods are not embodied in sub-section (3) to (14) of section 12 of the IGST Act , 2017 and as such the provisions of sub-section (2) of this section shall apply in respect of these services .

• It is also pertinent to note that section 7 of the IGST Act , 2017 which defines inter-State supply , in its sub-section (3) embodies following provisions :

“(3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in––

(a) two different States;

(b) two different Union territories; or

shall be treated as a supply of services in the course of inter-State trade or commerce.”

• Since the instant case falls in the ambit of section 12(2) of the Act thus the location of the supplier and the place of supply shall determine the nature of supply of services of storage or warehousing i.e. whether they are inter-State supply or intra-State supply .

• There is no room for any doubt that the location of the supplier in the instant case is the State of U.P. because such person is registered in the State of U.P. and the warehouse through which the services of storage are to be provided is also within U.P. . Such warehouse is also fixed establishment of such supplier situated in U.P. even if it has not been mentioned as the place of business in the registration certificate .

• Before determining the place of supply in the instant case which happens to be the location of the recipient , it is pertinent to go through the definition of fixed establishment as embodied in clause (50) of section 2 of CGST/SGST Act , 2017 and clause (5) of section 2 of IGST Act , 2017 which reads as follows :

“Fixed establishment ” means a place (other than the registered place of business) which is characterized by a sufficient degree of permanence and suitable surface in terms of human and technical resources to supply service or to receive and use service for its own need . “

• It is also pertinent to note that clause (14 ) of section 2 of IGST Act , 2017 defines location of the recipient of service as-

“(14) “location of the recipient of services” means,––

(a) where a supply is received at a place of business for which the registration has been obtained, the location of such place of business;

(b) where a supply is received at a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment;

(c) where a supply is received at more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concerned with the receipt of the supply; and

(d) in absence of such places, the location of the usual place of residence of the recipient;”

• Now coming back to the instant case since the entire warehouse is taken for storage or warehousing on the basis of yearly contract by such recipient person , thus such warehouse will qualify to be his “fixed establishment” because such recipient is receiving and using the services at this warehouse only and as such in the instant case the place of this fixed establishment which happens to be within U.P. , shall be the place of supply .

• Thus in the light of the aforesaid discussion it is quite evident that both the location of the supplier as well as the place of supply in the instant case are within the State of U.P. thus the underlying services will be of intra-State nature and shall not fall in the ambit of inter-State supplies .

• Thus the supplier of storage or warehousing services shall issue tax invoice in respect of such services by charging CGST at the rate of 9% and SGST at rate of 9% .