GST ON DRIED TOBACCO LEAVES: DELHI AAR CLARIFIES CLASSIFICATION UNDER HSN 2401

GST ON DRIED TOBACCO LEAVES: DELHI AAR CLARIFIES CLASSIFICATION UNDER HSN 2401

DELHI AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICES TAX

Case Title- Shri Shalesh Kumar Singh

(GST AAR DELHI)

Advance Ruling No. 04/DAAR/2018

(In Application No. 04/DAAR/2018 dated 09.01.2018)

Date of Judgment/Order- 6th April 2018

IMPORTANT PARAGRAPHS

Para No. 1. The applicant is interested in trading of “Dried Tobacco leaves’ which would be purchased from registered dealer who in return purchases such Tobacco Leaves Trum Agriculturist / Farmers. Such registered dealer after purchasing it from Agriculturist / Farmers will sell the same to Applicant as it is without any further change in its form.
Para No. 2. Applicant after cleaning and removal of unwanted particles (Bhusa, Dust etc.) will further sell such dried Tobacco Leaves’ in wholesale market. During the above explained activity of cleaning and removal of unwanted particles (Bhusa, Dust etc), no essence or foreign particle will be added to the ‘Dried Tobacco Leaves’, Such dried tobacco leaves will be sold in wholesale market without any branding on it. It is also clarified that such “Dried Tobacco Leaves’ are no: lit fur direct human consumption in any way.

Para No. 18. The issue for decision is whether such ‘Dried Tobacco Leaves’ will be classified under Heading 2401 of HSN or the same may be classified in Heading 2403 of HSN or in any other Heading of HSN. Further, if the same are classified under Heading 2401, whether the same will be covered in S. No. 109 of Schedule-l of Notification. no. 1/2017 – Central Tax (Rate) dated 28.06.2017, being ‘tobacco leaves’ or the same will be covered under S. No. 13 of Schedule-IV of the said Notification which covers ‘Unmanufactured Tobacco and Tobacco Refuse [other than: tobacco leaves).

Para No. 24. Aging: Curing and subsequent aging allow for the slow oxidation and degradation of carotenoids in the tobacco leaf. This produces various compounds in the tobacco leaves that give cured tobacco its sweet hay, tea, rose oil, or fruity aromatic flavour that contributes of the “smoothness” of the consumed product. Non-aged or low quality tobacco is often artificially flavoured with these otherwise naturally occurring compounds. The aging process continues for a period of months.

Para No. 38. Regarding Circular No, 81/5/87 CX-3 dated 23.06.19B7 issued by the Ministry of Finance, the same is regarding classification of unmanufactured tobacco merely broken by beating and then sieved and packed for consumption as chewing tobacco (Zarda) and it was clarified that the same should he classifiable as unmanufactured tobacco under heading 2401. Hence, the same is not applicable in the present case.

RULING

Para No. 42. It is held that the ‘Dried Tobacco Leaves’ which have undergone the process at curing after harvesting of tobacco leaves are ‘unmanufactured tobacco’ covered in HSN Code 2401, However, they are not covered under S. No. 109 of Schedule-1 of Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017 @ 2.5% (CG5T) – 2.5% (SGST) or 5%(IGST}, but the same are covered under S. No. 13 of Schedule- IV of the said Notification as ‘unmanufactured Tobacco (other than Tobacco Leaves) @ 14% (CGST) + 14% (SGST) or 28% (IGST).