2019 (4) TMI 74 - AAR - GST

Classification of goods - rate of tax - sun-cured Tobaco leaves Known in Kerala as purchased from farmers of Puliyampatti areas of Tamil Nadu used only for chewing by consumers in Kerala - whether taxable at 5% (CGST KGST) classifiable under Serial No. 109 of the Schedule I of Notification No. 1/2017 - Central Tax (Rate) dated 28-06-2017 or 28% classifiable under Serial No. 13 of Schedule IV of the said notification? - Held that - The produce Kannipukayila is nothing but tobacco leaves which are covered under Chapter 24 of Customs Tariff Act, 1975. As per HSN Code 2401, tobacco heaves are taxable at 5% GST. It is clarified that tobacco means any form of tobacco. whether cured or uncured and whether manufactured or not. and includes the leaves. stalks and stems of the tobacco plants, but does not include any part of the tobacco plants while still attached to the earth. Accordingly, tobacco leaves in any form. i.e. cured and uncured including leaves. stalks, and stems of the tobacco plant comes under entry 109 of First Schedule. The tobacco leaves including the leaves cut from plant. dry leaves. cured leaves by applying natural process ordinarily used by the farmers to make them fit to be taken go market shall qualify 5% tax rate. It is a common knowledge that without curing tobacco leaves cannot be consumed. The curing in relation to tobacco leaves, means removal of moisture from the tobacco leaves. Section 2(c) of Central Excise Act, 1944 specified that the term curing includes wilting, drying, fermenting and any process for rendering an unmanufactured product fit for marketing or manufacture. Hence. the unavoidable process of curing of tobacco leaves to make it fit for marketing will qualify the word curing mentioned in Chapter 24 of Customs Tariff Act, 1975.

Summary

Issues:
1. Applicability of HSN code to sun-cured "Tobacco leaves" known as "Kannipukayila" purchased from specific areas.
2. Determination of tax rate for "Kannipukayila" under specific descriptions.
3. Permissibility of charging lump-sum price in invoice without specifying GST quantum.
4. Determination of GST liability on lump-sum price.
5. Penal consequences if tax rate paid is lower than confirmed liability.

Analysis:
1. The applicant sought clarification on the applicable HSN code for sun-cured "Tobacco leaves" known as "Kannipukayila" purchased from specific areas. The ruling confirmed that sun-cured tobacco leaves fall under HSN Code 2401.

2. Regarding the tax rate applicable to "Kannipukayila," it was determined that tobacco leaves falling under heading no. 2401 are subject to 5% GST (2.5% CGST + 2.5% SGST) as per Notification No. 01/2017 - Central Tax (Rate) dated 28-06-2017.

3. The query about charging a lump-sum price in the invoice without specifying the GST amount was addressed by referring to Rule 46 of SGST Kerala Rules, which mandates that a tax invoice issued by a registered person must contain particulars of the tax amount charged for taxable goods or services.

4. The ruling clarified that GST liability is to be determined based on the taxable value of the supply of goods or services, emphasizing that tax should be collected on the taxable value, whether as a lump-sum price or after deduction of notional GST.

5. In case the applicant pays tax at a lower rate (5%) but the liability is confirmed at a higher rate (28%), the ruling indicated that penal consequences would be governed by the provisions of the prevailing law. The decision highlighted the importance of complying with the correct tax rates to avoid potential penalties or consequences.