Goods and Services Tax – GST – By: – Mr. M. GOVINDARAJAN – Dated:- 14-2-2019 Last Replied Date:- 15-2-2019 – Gudakhu is a paste-like tobacco preparation used widely in Orissa and neighboring states of India. During use it is rubbed over the teeth and gum with a finger tip. Besides tobacco, it contains molasses, lime, red soil and water. Use of tobacco in the form of gudakhu has been developed recently among large number of population in rural area of Chhattisgarh. Particularly, in Chhattisgarh, gudakhu is popular in all socioeconomic groups since it is widely available and more affordable in price. The Authority for Advance Ruling, Odhisha gave a ruling on the classification of gudakhu in the application filed by Prabhat Guadkhu Factory, Jyoti Mill, Koraput, Odisha before the Authority for Advance Ruling, on 05.02.2019. The applicant is engaged in the business of manufacture and sale of 'gudokhu', a tobacco product in a paste form which is applied orally on the teeth and gums,
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ual category for manufactured tobacco that is used for chewing'. Though the applicant was of the belief that gudokhu would be covered by the tariff heading no. 2403 1110, in view of the instructions from the central excise officials, the tariff heading was declared as 2403 99 90 and applicable taxes and duties were paid as applicable to the latter tariff heading. In GST regime, the gudakhu is subjected to compensation cess as detailed below- 243 11 10 – 'Hookah' or gudakhu' tobacco bearing a brand name – 72%; 243 11 10 – Tobacco used for smoking hookah' or chilam' commonly known as 'hookah' tobacco or 'gudakhu' not bearing a brand name – 17% The code 2409 99 90 under which the applicant paid taxes before GST regime has the following rates of compensation cess as detailed below- 2403 99 90 – Pan Masaala containing tobacco gutka – 204%; 2403 99 90 – All goods other than pan masaala containing tobacco gutkha bearing a brand name – 96%; 2403 99 90 –
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of the considered view that their product 'gudakhu' falls under the HSN classification of 2403 11 10. That gudakhu' is specifically mentioned in the HSN classification and tagged along with 'hookah' under tariff heading 2403 11 10. The Hon'ble High Court of Odisha has observed in the case of Shamsuddin Akbar Khan and Co., as reported in 1974 (7) TMI 114 – ORISSA HIGH COURT that gudakhu is a kind of manufactured tobacco and is very much akin to hookah tobacco. The CESTAT, Delhi had, in another case of the said appellant, concurred with the views Of the Hon'ble High Court of Odisha that gudakhu is not very much different from hookah tobacco the residual category of 2403 9990 contains all other tobacco products in the nature of gutkha which are meant for chewing. When there is a specific entry under classification 2403 1110 referring to the product even by its very name, it would be wrong to classify the product under the residual classification of 2403 9990.
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glycerol, whether or not containing aromatic oils and extracts, molasses or sugar and whether or not flavored with fruit. The tariff item 24031110'Hookah or Gudakhu Tobacco bearing a brand name refers to Hookah or Gudakhu Tobacco (branded) used as a smoking tobacco in a water pipe as explained in the sub heading note of Chapter 24, under sub heading 240311. In no way it refers to the non-smoking tobacco irrespective of the nomenclature and composition. Commercially Hookah or Gudakhu Tobacco is sold in granular form which is not the case in gudakhu manufactured by the applicant. Gudakhu manufactured by the applicant is sold as a paste and is used as a tooth paste. Hence, it is distinctly different from hookah tobacco by its essential character and use. While hookah or gudakhu tobacco as classified under 2403 11 10 is used as a smoking tobacco through a water pipe. Gudakhu manufactured by the applicant is sold in the form of a paste for use as a tooth paste and not as a smoking tobac
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ng sub-headings under chapter 24 and also not specified under the tariff items specified under sub-heading 2403 99. Thus, the contention of the applicant that a tariff item can be classified under the sub-heading 2403 99 only if the said item belongs to the family of chewing tobacco like 'gutkha', zarda or khaini is totally misplaced in as much as the said sub-heading also specifies other tobacco products such as cut tobacco, tobacco extracts and snuff etc. Therefore, the general rule of classification as relied upon by the applicant cannot be applied in the case of gudakhu as manufactured and sold by the applicant simply because it does not belong to the family of chewing tobacco such as zarda and gutka. The Authority for Advance Ruling held that it can be classified and rightly so under the residual tariff item 2403 99 90 – other' of the said Chapter Heading because of its composition, character and use. As regards Determination of the liability to pay NCCD, the Authority
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