Looking for expert help with Income tax and GST for cold storage owners India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- Storage of agricultural produce (potatoes, onions, fresh fruit and vegetables) is exempt from GST under S. No. 54(e) of Notification 12/2017-Central Tax (Rate).
- Storing dal, jaggery, tea or processed dry fruits isn't storage of agricultural produce (CBIC Circular 16/16/2017-GST). Refrigerated storage of such goods is taxed at 18%.
- Store only exempt produce and you don't need GST registration. Add one taxable customer and your exempt receipts count towards the Rs 20 lakh limit.
- Section 35AD lets a new cold storage deduct 100% of its capital cost, but only in the old tax regime.
- A proprietor or firm with turnover up to Rs 3 crore (cash within 5%) can use Section 44AD at 6% deemed profit on bank receipts.
Is GST applicable on cold storage charges in India? It depends on what you store. Storage or warehousing of agricultural produce is exempt under S. No. 54(e) of Notification 12/2017-Central Tax (Rate). Storage of anything else, including processed items like dal and jaggery, is refrigerated storage service (code 996721) taxed at 18% under Notification 11/2017-Central Tax (Rate).
Many cold storage owners assume their whole business is GST-free. For a potato-only cold storage, that's right. But the moment a trader asks you to hold a few hundred bags of dal, jaggery or dry fruits, part of your income turns taxable, and that one customer can pull you into GST registration. On the income tax side, the choice between Section 44AD, full books and the Section 35AD deduction can change your tax bill by lakhs. This guide covers both for AY 2026-27 (FY 2025-26).
What does GST apply to in a cold storage?
GST follows the goods you store, not the building. Here's the split.
Comparison
GST on Cold Storage Receipts (FY 2025-26 onwards)
| What you charge for | GST | Basis |
|---|---|---|
| Storing fresh potatoes, onions, fruit and vegetables | Exempt | S. No. 54(e), Notification 12/2017-CT(R) |
| Loading, unloading and packing of that produce | Exempt | S. No. 54(e), Notification 12/2017-CT(R) |
| Storing rice | Exempt | S. No. 24, Notification 12/2017-CT(R) |
| Pre-cooling, ripening or waxing of fruits and vegetables | Exempt | S. No. 57, Notification 12/2017-CT(R) |
| Storing dal (split pulses), jaggery, tea or processed dry fruits | 18% | Circular 16/16/2017-GST; S. No. 11(ii), Notification 11/2017-CT(R) |
| Storing ice cream, processed frozen food or medicines | 18% | Service code 996721; S. No. 11(ii), Notification 11/2017-CT(R) |
| Rent from letting out an office or shop in your premises | 18% | Renting of commercial property is taxable |
Source: Notifications 11/2017 and 12/2017-Central Tax (Rate); CBIC Circular 16/16/2017-GST; 56th GST Council recommendations (no change to storage services)
The test for "agricultural produce" sits in the definition in Notification 12/2017: produce of cultivation on which either no further processing is done, or only the processing a cultivator or producer usually does, which doesn't change its essential character but makes it marketable for the primary market. A bag of potatoes straight from the field passes. Dal doesn't, because de-husking and splitting are done by millers, not farmers. Jaggery doesn't, because turning sugarcane into jaggery changes its character. CBIC said both in Circular 16/16/2017-GST.
Spices, nuts and cotton need care. Until 17 July 2022, a separate entry exempted storage of items like nuts, spices, copra, jaggery and raw cotton. The 47th GST Council withdrew that exemption from 18 July 2022, and CBIC Circular 177/09/2022-TRU confirms it. If you store dried chillies or turmeric, don't assume the old exemption still covers you. Check the item against the definition above with your CA before you bill it as exempt.
When does a cold storage need GST registration?
If you store only exempt produce, you don't need to register, however large your turnover. Section 23(1)(a) of the CGST Act excludes anyone engaged exclusively in supplying wholly exempt goods or services.
That word "exclusively" is where cold storages get caught. Take one taxable customer, and Section 22 applies: you must register once aggregate turnover crosses Rs 20 lakh in a year (Rs 10 lakh in special category states). And under Section 2(6), aggregate turnover includes exempt supplies.
Example: a cold storage near Agra bills Rs 48,00,000 for potato storage in FY 2025-26. It also holds dal for a wholesaler and bills Rs 6,00,000 for that.
- Aggregate turnover: Rs 48,00,000 + Rs 6,00,000 = Rs 54,00,000. That's above Rs 20 lakh, so registration is compulsory.
- GST on the dal storage: 18% of Rs 6,00,000 = Rs 1,08,000 (Rs 54,000 CGST + Rs 54,000 SGST).
- The Rs 48,00,000 potato storage stays exempt. You report it as exempt supply in your GST returns.
Without the dal customer, this cold storage wouldn't need to register at all.
Step-by-Step Guide
Does Your Cold Storage Need GST Registration?
List every receipt
Storage charges by commodity, loading and handling charges, rent from sub-tenants, sale of scrap or old machinery.
Mark each one exempt or taxable
Unprocessed farm produce is exempt. Dal, jaggery, tea, processed dry fruits, ice cream, processed frozen food and medicines are taxable at 18%.
Only exempt receipts? No registration
Section 23(1)(a), CGST Act. Keep commodity-wise storage records in case you're asked to show it.
Any taxable receipt? Add everything up
Aggregate turnover includes exempt receipts (Section 2(6)). Above Rs 20 lakh (Rs 10 lakh in special category states), you must register.
After registering, split your input credit
Input tax credit is allowed only for the taxable share. Common credits on repairs, ammonia or spares are split under Rule 42 of the CGST Rules.
Source: Sections 2(6), 17(2), 22 and 23(1)(a), CGST Act 2017; Rule 42, CGST Rules 2017
A practical point: electricity is your largest cost and carries no GST, so there's no credit to claim on it either way. Our GST registration service can check your receipts and register you if needed, and our GST return filing service handles the monthly exempt-plus-taxable reporting. For the credit split, see our Rule 42 and 43 guide.
Section 35AD: 100% deduction for a new cold storage
If you're building a new cold storage, Section 35AD is the biggest income tax decision you'll make. It allows a deduction of the whole capital expenditure incurred for a "specified business" in the year it's spent. Cold chain facilities and warehousing facilities for storing agricultural produce are both specified businesses. Land, goodwill and financial instruments don't qualify.
The catches:
- Old regime only. The new tax regime under Section 115BAC doesn't allow the Section 35AD deduction (Finance Bill 2020 memorandum). A proprietor with business income who wants it must opt out of the new regime by filing Form 10-IEA. See how to switch regimes.
- No depreciation later. Once you claim 35AD on an asset, you can't claim depreciation on it in any year.
- Losses stay ring-fenced. A loss from a specified business can be set off only against profits of a specified business (Section 73A), not against your other income.
- No cash payments. Capital expenditure paid to a person in a day above Rs 10,000 other than by account payee cheque, draft or bank transfer isn't eligible (Finance Act 2017, from AY 2018-19).
- It's optional. Since AY 2020-21, you can choose not to claim 35AD and take normal depreciation instead.
Example: a new cold storage starts operating in FY 2025-26. It spends Rs 3,50,00,000 on the building and refrigeration plant and Rs 40,00,000 on land. Under the old regime with Section 35AD, it deducts Rs 3,50,00,000 this year. The Rs 40,00,000 for land gets no deduction. If the first-year profit is lower than Rs 3.5 crore, the unused amount is carried forward as a specified-business loss. Under the new regime, it instead claims normal depreciation on the building and plant over the years. Compare the two over 5 to 10 years, not just year one. Our depreciation guide has the rates.
Section 44AD or full books for an existing cold storage?
For a running cold storage owned by a proprietor or partnership firm (not an LLP), Section 44AD is worth checking. Deemed profit is 6% of turnover received through banking channels and 8% of cash turnover. The limit is Rs 2 crore, or Rs 3 crore if cash receipts are within 5% of turnover.
Example (proprietor, new regime, FY 2025-26): storage receipts of Rs 1,50,00,000, all received by bank transfer. Cash is nil, so the Rs 3 crore limit applies.
- Under Section 44AD: 6% of Rs 1,50,00,000 = Rs 9,00,000. Tax: 5% of Rs 4,00,000 (Rs 4-8 lakh) = Rs 20,000, plus 10% of Rs 1,00,000 (Rs 8-9 lakh) = Rs 10,000. Total Rs 30,000. Income is within Rs 12 lakh, so the Section 87A rebate of up to Rs 60,000 covers it. Tax payable: nil.
- Under full books, say profit after depreciation is Rs 18,00,000: Rs 20,000 + Rs 40,000 (Rs 8-12 lakh) + Rs 60,000 (Rs 12-16 lakh) + Rs 40,000 (20% of Rs 2,00,000 above Rs 16 lakh) = Rs 1,60,000. Add 4% cess of Rs 6,400. Total Rs 1,66,400.
Two cautions before you pick 44AD. First, if you opt out of 44AD within five years of using it, you can't use it again for the next five years (Section 44AD(4)). Second, a partnership firm pays a flat 30% and doesn't get the 87A rebate, so the numbers look different for a firm. Read our Section 44AD guide for the conditions.
Cash rules apply whichever route you take. You can't accept Rs 2 lakh or more in cash from one farmer in a day or for one transaction (Section 269ST). If you keep books, a cash expense above Rs 10,000 to one person in a day is disallowed (Section 40A(3)). And if you used 44AD in any of the last five years and now declare a lower profit, Section 44AD(4) applies; with income above the basic exemption limit, you'll need a tax audit under Section 44AB(e).
From FY 2026-27, the Income-tax Act 2025 replaces the 1961 Act and section numbers change. Your FY 2025-26 return still follows the 1961 Act sections above.
Common mistakes cold storage owners make
- Treating all storage income as exempt. Dal, jaggery, tea, processed dry fruits, ice cream and processed frozen food are taxable at 18%.
- Ignoring exempt receipts when testing the Rs 20 lakh limit. Once you have one taxable customer, potato storage receipts count too.
- Billing spice or cotton storage as exempt after July 2022. That exemption was withdrawn from 18 July 2022.
- Claiming 35AD in the new regime. It isn't allowed there. Opt out with Form 10-IEA first, or take depreciation.
- Paying a contractor in cash for construction. Payments above Rs 10,000 a day in cash knock that cost out of Section 35AD.
How Tax Garden helps cold storage owners
We sort your storage bills commodity by commodity, tell you whether you need GST registration, and file your GST returns with the exempt and taxable parts reported correctly. At year end, we compare Section 44AD, full books and Section 35AD against your actual numbers and file your return through our ITR filing service. See pricing for plans.
