2018 (11) TMI 449 – AUTHORITY FOR ADVANCE RULING, ANDHRA PRADESH – 2018 (19) G. S. T. L. 327 (A. A. R. – GST) – Rate of GST – the applicant purchases the dried leaves on auction platform, and trading. Getting the jobwork done for threshing and trading – Held that:- As per the Circular of Tax Research Unit, vide F. No. 332/2/2017, Government of India Ministry of Finance Department of Revenue Tax Research Unit, Dec 2017, question no. 42 “Tobacco leaves falling under heading 2401 attracts 5% GST on reverse charge basis in respect of supply by an agriculturist – the transactions of tobacco from auction platform to the supply made to the exporter are to be interpreted in the light of the relevant notifications and to decide the rate of tax accordingly.
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As seen from the different stages of commodity i.e., from the leaves stage to the final product (manufactured tobacco), the green leaf plucked from the plant undergoes different types of curing to reduce the level of moisture to the ma
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anufactured tobacco’.
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The process of tobacco, from the field to final product, the green leaves undergo curing process, and become eligible commercial commodity, for which the first transaction takes place in between the farmer and the trader on the auction platform. Further, as per the clarification issued by TRU tobacco leaves means leaves of tobacco as such or broken tobacco leaves or tobacco leaves stems” also clearly express that the leaves as long as they do not loose their basic character as ‘leaves’ shall be considered as tobacco leaves only.
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Ruling:- Rate of GST if tobacco leaves procured at tobacco auction platforms or directly from farmers, which are cured and dried by farmers themselves – Held that:- The GST Rate of tax for the tobacco leaves procured at tobacco auction platforms or directly from farmers, which are cured and dried by farmers themselves is 5% – HSN Code: 2401.
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Rate of GST if the applicant purchases tobacco leaves from other dealers who have
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. No 109 of Schedule I Notification No. 1/2017 (CGST)Central tax) Rate. Dt 28.6.2017 – HSN Code: 2401.
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Rate of GST if the applicant gets the tobacco threshed and re-dried on job work basis at GLT plants and then sells such threshed and re dried tobacco leaves – Held that:- Rate of GST will be 28% (14 % SGST + 14 % CGST) as per Sl. No 13 of Schedule IV Notification No. 1/2017 (CGST)Central tax) Rate. Dt 28.6.2017 – HSN code: 2401. – AAR/AP/17(GST)/2018 in Application No. AAR/28/(GST)/2018 Dated:- 10-10-2018 – SRI. J.V.M SARMA AND SRI. AMARESH KUMAR, MEMBER Present for the Applicant: Sri. A. Siva Prasad (Authorized Representative) Present for the Jurisdictional Officer: Remarks Received Note: Under Section 100 of the APGST Act 2017, an appeal against this ruling lies before the appellate authority for advance ruling constituted under section 99 of APGST Act 2017, within a period of 30 days from the date of service of this order. M/s. PRAGATHI ENTERPRISES, Jammulapalem Village, Tan
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tobacco leaves re dried without getting them threshed what is the applicable rate or tax? If the applicant gets the tobacco threshed and re-dried on job work basis at GLT plants and then sells such threshed and re dried tobacco leaves what is the applicable rate of tax? 1. The applicant is a trader in tobacco in all varieties and form of tobacco available. Guntur and Prakasam Districts are famous for tobacco leaf and various verities of Tobacco, mainly FCV as well as Natu tobacco (Non-FCV) are widely available in these regions. 2. The applicant is registered with The Tobacco Board as Dealer in Tobacco vide Regn No: TB/DEALER/2018/4753, but not registered under GST as his turnover is below the threshold limit. However he would like to register with GST authorities in anticipation of his growing business requirement as and when the turnover crosses the threshold limit. 3. It is submitted that, a. Until the enactment of GST Act, the products of Tobacco leaves / Unmanufactured Tobacco wer
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ed/ stripped 2401.30 – Tobacco refuse c. There is clarity as to the product description in the above two heading. However the words of Tobacco leaves and Unmanufactured Tobacco (other than tobacco leaves) are not defined in the tariff. d. FCV Tobacco Leaves, Flue Cured Virginia Tobacco is widely available in the region of Guntur and Prakasam and these leaves are cultivated by the farmers. FCV Tobacco is regulated and is permitted to be purchased or sold only at the Tobacco Auction Platforms conducted by the Tobacco Board. e. The tobacco leaves after cultivation will be plucked and separated from the plants. These leaves, as plucked from trees are green in color and are very tender, delicate and very high in moisture. In this stage they will get damaged and rotten within few days of time unless cured. The tobacco leaves are cured (technical name for drying) in various forms or styles viz., Sun curing, Air curing, Flue Curing etc. whereby the leaves are dried and the moisture levels are
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umstances the applicant may undertake the following minimal process on the tobacco before supplying as per the requirement of the dealer. (i) Grading: The applicant may get an order from the buyers to to grade the tobacco. In such a case, the applicant engages manual labour to segeragate or classify the tobacco leaves into various grades depending on their size (width), length, colouror shade and other physical parameters of the leaf. These activities will be performed manually by unskilled labour and who will open the bale and separate the tobacco leaves to physically grade the tobacco into different categories as stated above. The tobacco leaves so graded, will again be packed into bales and wrapped in Jute bags for onward supply to other tobacco dealers or manufacturers. (ii) Butting: The tobacco leaf when plucked from the plant will have a rough edge on the side it attaches to the plant. These rough edges may damage other leavesor make packing difficult. Therefore the edge of the t
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sical or chemical parameters of the leaf. Normally re-drying is order for, if it is not proposed to supply the tobacco for immediate threshing. These processes of grading, butting or redrying are undertaken at a specific requirement of the buyer and hardly 5% of the tobacco leaves is specified for these processes. d) The applicant will normally sell the tobacco leaves to tobacco exporters or manufacturers. The tobacco leaves will be subject to a process called Threshing and Redrying at GLT plants. Threshing is a process of separating the stem or the Mid-rib of the leaves and the leaves portion without stem is called Lamina . The threshing is undertaken on certain plant and machinery, normally referred to as Green Leaf Threshing Plants (GLTs). In GLTs, the lamina and stem are separated and the Lamina is redried to ensure uniform and homogenized moisture throughout the lot. e) The Tobacco after threshing and redrying is also referred in the trade parlance as tobacco leaf only. The essent
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y other agricultural commodity in the form of leaves will require. Hence they are necessarily be cured (technical name for drying) by the agriculturist/ farmers himself in various ways viz., Sun curing, Air curing, Flue Curing, Fire curing etc., whereby the leaves are dried and the moisture levels are reduced to make them fit for primary marketability by the farmer. It is pertinent to note here that the entire tobacco brought for the primary market is after curing by the farmers. It is needless to say that the green tender leaves as plucked from the plant will never be marketed anywhere in the world. b) A Detailed chart of tobacco from farm to final product is furnished. c) After procuring the tobacco leaves in the market, the leaves can either be traded as such or may be graded as per their colour, length and other parameters and then traded or used for further manufacturing of tobacco. Occasionally the tobacco may be butted and re-dried without threshing. d) The tobacco is then thres
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s cured. The tobacco leaves are cured (technical name for drying) in different forms or styles viz., Sun curing, Air curing, Flue Curing etc.(any one method) whereby the leaves are dried and the moisture levels are reduced Air curing will be adopted for lighter / thin type of leaves. Sun curing involves exposing the leaves under sun, in inverted positions. Sun cures enable more dryness than air curing Flue curing involves transmitting heat through ducts and this will result in more uniform and consistent curing of the tobacco leaves. All three of curing will be undertaken by farmers at the field level. Cured tobacco Leaf Bundled for Trading Optional Process (Grading) Optional Process (Butting) The cured tobacco leaves with Iow-moisture due to curing will be first tradable commodity (Primary marketable product) The cured tobacco leaves will be bundles into bales and brought to the auction platform in case of FCV (Flue Cured Virginia Tobacco) and to market in case of Non-FCV tobacco. Gra
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arious commodities. 80% of FCV tobacco is exported at Threshing stage and balance is sold to local manufactures of Cigarettes. Other kinds of tobacco may be sold for different purpose. Cut-Rag Cut rag (Chemically blended) Cigarette Pipe This is machine made cutting of strands of tobacco (unmanufactured) Chemically blended and flavoured tobacco. Fiited into a cigarette tube. Filled into a somke-Pipe, Fermented Leaf Cherrots Cigars Bidis Fermented dried tobacco leaves for the manufacture of cherrots or cigars. Rolled Fermented leaves into Cherrots. Rolled Fermented leaves into Cigars, (tapered on one side) Tobacco dust, wrapped along with other materials into Bidi Leaves Tobacco Chew: Guthka Khaini Snuff Chewing Tobacco. Chewing tobacco treated with lime and other chemicals Chewing tobacco treated with flavours and Masalas. Tobacco snuff made from dried tobacco leaves and dust for inhaling purpose. 6. Contentions of the applicant. a) All of the tobacco crop that is produced shall have to
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the term in common parlance or commercial parlance has to be adopted as held in the case of Oswal Agro Mills Ltd vs. CCE, [1993 (66) E.L.T. 37 (S.C.) = 1993 (4) TMI 73 – SUPREME COURT OF INDIA. e) In the case of IdupulapatiSesha Rao, Karedu Vs State of AP (13 APSTJ 44), the Honourable Sales Tax Appellate Tribunal of AP, Hyderabad held that in the classification of commodities, the meaning of the article should be understood according to the common commercial understanding and not in their scientific and technical sense. f) It is also a well settled law that and held in various celebrated cases like M/s. D.s. Bist & sons Nainital 1979 (004) SCC – 0741 = 1979 (9) TMI 168 – SUPREME COURT OF INDIA that It should be remembered that almost every kind of agricultural produce has to undergo some kind of processing or treatment by the agriculturist himself in his farm or elsewhere. In order to bring them to a condition of non-perishability and to make them transportable and marketable, som
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ricultural activity only as in the case of other commodities like cotton, chillies etc. The threshed and re-dried FCV tobacco has no use as such, hence it can be considered as primary agricultural produce only. h) It is a settled legal position that an entry in the tariff has to be read as it is following the principle of literal Rule of interpretation and the word , term or a phrase shall not be read by affixing or suffixing another word to it. In the above entry, the term Tobacco Leaves is mentioned without any qualifier attached to it viz., dried tobacco leaves , undried tobacco leaves , cured tobacco leaves etc., In such cases, it cannot be read that tobacco leaves means only those leaves cut from the plants and tobacco leaves on which certain operations are conducted will not be tobacco leaves . It is also clear that in the absence of the definition given to the term tobacco leaves , shall be under stood in its natural and commercial meaning. i) There are many other agricultural c
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I 2.5% 19. 0301 Live fish. 20. 0302 Fish, fresh or chilled, excluding fish fillets and other fish meat of heading 0304 21. 0304 Fish fillets and other fish meat (whether or not minced), fresh or chilled. Tea leaves Taxable Tea leaves 36. 0902 Tea, whether or not flavored [other than unprocessed green leaves of tea]-2.5% Sch.l Exempt tea leaves 61. 0902 Unprocessed green leaves of tea Nuts Taxable nuts: 28. 0802 Dried areca nuts, whether or not shelled or peeled 29. 0802 Dried chestnuts (singhada), whether or not shelled or peeledSche 12.5% 62. 1109 00 00 Wheat gluten, whether or not driedSch. I2.5% (gluten means proteins contained in wheat) Exempt Nuts 49. 0802 Other nuts, Other nuts, fresh such as Almonds, Hazelnuts or filberts (Coryius spp.), walnuts, Chestnuts (Castanea spp.) Pistachios, Macadamia nuts, Kola nuts (Cola spp.), Areca nuts, fresh, whether or not shelled or peeled Dates Taxable dates:- 16. 0804 Dates, figs, pineapples, avocados, guavas, mangoes and mangos teens, dried-S
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will be not be any product that can be taxed at 5%. It means that the provision of Schedule I Item no 103 will go redundant without application which is definitely not the intention of the legislature. k) The applicable rates of GST for goods were mentioned in Notification 1/2017 Central Rate. It is not mentioned as to who shall be supplier and who shall be recipient. While notification 4/2017 CGST (R) notifies the cases where the RCM (reverse charge Mechanism) shall be applied, it is silent as to the rate. Thus as long as the product remains the same, it does not matter whether the same is procured from an agriculturist or an unregistered dealer, or registered dealer. The application of RCM is only to prescribe as to who shall pay the tax and it had no bearing on the applicability of the rate of GST. 7. The applicant has sought for the following clarifications. i. What is the rate of GST applicable on tobacco leaves procured at tobacco auction platforms or directly from farmers, whic
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with stage wise physical specimens of tobacco. In support of his argument he has furnished the letter issued by the ICAR – Central tobacco Research Institute – Rajahmundry, Andhra Pradesh. The concerned jurisdictional authority Assistant Commissioner State Tax Ongole -2 have submitted that there are no proceedings passed or pending in this regard. . Legal Position 1. The rates of GST in relation to tobacco are covered under the heads as under, (Notification no; 1/2017, Central Tax (Rate), Schedule HSN Product Description Rate of GST Schedule -I : Sl No 109 2401 Tobacco Leaves CGST 2.5% i.,e total GST % = 5% Schedule – IV; Sl No; 13 2401 Unmanufactured Tobacco; tobacco refuse (other than tobacco leaves) CGST 14 % ie., total GST = 28% Schedule – IV; Sl. No; 14 2402 Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes CGST 14 % ie., total GST = 28% Schedule – IV; No; 15 2403 Other manufactured tobacco and manufactured tobacco substitutes; -homogenized or-reco
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Flue Cured Virgina Tobacco 2401 20 20 Sun cured Country (Natu) Tobacco 2401 20 30 Sun cured Virgina Tobacco 2401 20 40 Burley Tobacco 2401 20 50 Tobacco for manufactures of Bidis, not stemmed 2401 20 60 Tobacco for manufactures of Chewing tobacco 2401 20 70 Tobacco for manufactures of cigar and cherrot 2401 20 80 Tobacco for manufactures of Hokkah tobacco 2401 20 90 Other 2402 Cigars, Cheroots, Cigarillos And Cigarettes, Of Tobacco Or Of Tobacco Substitutes 2403 Other manufactured tobacco and manufactured tobacco substitutes; homogenized or reconstituted tobacco; tobacco extracts and essences [including biris] 4. As per the Circular of Tax Research Unit, vide F. No. 332/2/2017, Government of India Ministry of Finance Department of Revenue Tax Research Unit, Dec 2017, question no. 42 Tobacco leaves falling under heading 2401 attracts 5% GST on reverse charge basis in respect of supply by an agriculturist. What is the meaning of tobacco leaves? it has been answered that For GST rate of 5
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aves as such are not used for making tobacco products (both smoke and non smoke) as it contains huge moisture (75% – 80%). The process of curing is done by the solar energy (sun curing), or air /shade or thermal energy (flue curing) depending upon the type of tobacco to be cured. As the curing process is done by the farmer at farmer s place. it is construed as an integral part of tobacco leaf production process As seen from the different stages of commodity i.e., from the leaves stage to the final product (manufactured tobacco), the green leaf plucked from the plant undergoes different types of curing to reduce the level of moisture to the maximum extent for sustainability and to continue as leaf for further processes. The tobacco leaf will be entitled as a commercial commodity only after drying (curing) and normally put to trade in form of bundles. The same will be traded between the farmer and the trader, and trader to trader/manufacturer and so on. As envisaged from the entries unde
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em It is observed that the two entries Sl.No 109, of Schedule I tobacco leaves and entry no 13 of IV schedule Unmanufactured Tobacco; tobacco refuse (other than tobacco leaves) in the notification No 1/2017 (CGST Rate)Central Tax are only falling under the same HSN code 2401 .. On detailed examination of the description of the commodity under the head 2401, 2401.10 : represents the commodities of Tobacco not stemmed or stripped, and 2410.20 represents the commodity Tobacco partly or wholly stemmed or stripped . Further, the entries 2402, speaks about the finished product, and 2403 describes about the other products made out of tobacco. Hence the other two are not relevant for the present case. Therefore, a clear distinction shall be drawn between the tobacco leaves and the unmanufactured tobacco . As observed from the facts, i.e process of tobacco, from the field to final product, the green leaves undergo curing process, and become eligible commercial commodity, for which the first tra
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s who have purchased them farmers, for the purpose of trading what will be the applicable rate of tax? Ruling : 5% (2.5 % SGST + 2.5 % CGST) as per sr. No 109 of Schedule I Notification No. 1/2017 (CGST)Central tax) Rate. Dt 28.6.2017 iii. If the applicant segregates the tobacco into grades depending upon their size (width), colour/shade, length, texture of the leaf etc and sells such graded tobacco leaf what is the applicable rate of tax? Ruling : 5% (2.5 % SGST + 2.5 % CGST) as per Sl. No 109 of Schedule I Notification No. 1/2017 (CGST)Central tax) Rate. Dt 28.6.2017 iv. If the tobacco leaves are butted and sold to other dealers what will be the applicable rate of tax? Ruling : 5% (2.5 % SGST + 2.5 % CGST) as per Sl. No 109 of Schedule I Notification No. 1/2017 (CGST)Central tax) Rate. Dt 28.6.2017 v. If the applicant gets the tobacco leaves redried without getting them threshed what is the applicable rate of tax? Ruling : 5% (2.5 % SGST + 2.5 % CGST) as per Sl. No 109 of Schedule I
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