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2018 (11) TMI 449 - AAR - GSTRate 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. 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 - The commodity tobacco leaves shall be interpreted in the light of the entry 109, the entry no 3 inserted under the notification issued for liability under reverse charge mechanism and the relevant HSN code mentioned against the description of the commodity i.e, 2401. Though there are different entries with respect to tobacco, there is a specific entry in schedule I of Notification 1/2017 (CGST Rate) as tobacco leaves , and for the same the liability was brought under reverse charge mechanism. Hence it is clear that there is a distinction from the commodity tobacco leaves with other entries - a clear distinction shall be drawn between the tobacco leaves and the unmanufactured tobacco . 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. 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. Rate of GST if the applicant purchases tobacco leaves from other dealers who have purchased them farmers, for the purpose of trading - Held that - The rate of GST will be 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 Rate of GST if the applicant segregates the tobacco into grades depending upon their size (width), colour/shade, length, texture of the lear etc., and sells such graded tobacco leaf - Held that - The rate of GST will be 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 - HSN Code 2401. Rate of GST if the tobacco leaves are butted and sold to other dealers - Held that - The rate will be 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 - HSN Code - 2401. Rate of GST if the applicant gets the tobacco leaves re dried without getting them threshed - Held that - Rate of GST will be 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 - HSN Code 2401. 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.
Issues Involved:
1. GST rate on tobacco leaves procured at auction platforms or directly from farmers. 2. GST rate on tobacco leaves purchased from other dealers. 3. GST rate on graded tobacco leaves. 4. GST rate on butted tobacco leaves. 5. GST rate on redried tobacco leaves. 6. GST rate on threshed and redried tobacco leaves. Detailed Analysis: 1. GST Rate on Tobacco Leaves Procured at Auction Platforms or Directly from Farmers: The Authority for Advance Ruling (AAR) determined that the GST rate for tobacco leaves procured at auction platforms or directly from farmers, which are cured and dried by farmers themselves, is 5%. This is based on Schedule I, Sl. No. 109 of Notification No. 1/2017 (CGST Rate), which specifies a GST rate of 5% for tobacco leaves. 2. GST Rate on Tobacco Leaves Purchased from Other Dealers: The AAR ruled that if the applicant purchases tobacco leaves from other dealers who have purchased them from farmers, for the purpose of trading, the applicable GST rate is 5%. This is also in accordance with Schedule I, Sl. No. 109 of Notification No. 1/2017 (CGST Rate). 3. GST Rate on Graded Tobacco Leaves: When the applicant segregates the tobacco into grades based on their size, color/shade, length, texture, etc., and sells such graded tobacco leaves, the applicable GST rate remains 5%. This ruling is consistent with Schedule I, Sl. No. 109 of Notification No. 1/2017 (CGST Rate). 4. GST Rate on Butted Tobacco Leaves: The AAR confirmed that if the tobacco leaves are butted and sold to other dealers, the applicable GST rate is 5%. This is in line with Schedule I, Sl. No. 109 of Notification No. 1/2017 (CGST Rate). 5. GST Rate on Redried Tobacco Leaves: If the applicant gets the tobacco leaves redried without getting them threshed, the GST rate applicable remains 5%. This is as per Schedule I, Sl. No. 109 of Notification No. 1/2017 (CGST Rate). 6. GST Rate on Threshed and Redried Tobacco Leaves: For tobacco leaves that are threshed and redried on a job work basis at GLT plants and then sold, the applicable GST rate is 28%. This is based on Schedule IV, Sl. No. 13 of Notification No. 1/2017 (CGST Rate), which applies to "Unmanufactured Tobacco; tobacco refuse (other than tobacco leaves)" and specifies a GST rate of 28%. Conclusion: The AAR's rulings provide clarity on the GST rates applicable to various forms and processes of tobacco leaves. The key distinction is that while basic cured and dried tobacco leaves are taxed at 5%, more processed forms such as threshed and redried tobacco are taxed at a higher rate of 28%. This differentiation is crucial for traders and manufacturers in the tobacco industry to understand their tax liabilities accurately.
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