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2019 (11) TMI 1320 - AAR - GSTRate of GST - tobacco leaves procured at tobacco auction platforms or directly from farmers, which are cured and dried by farmers themselves - applicant purchases tobacco leaves form other dealers who have purchased them from farmers, for the purpose of trading - 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 - tobacco leaves are butted and sold to other dealers - tobacco leaves re-dried without getting them threshed - tobacco leaves threshed and re-dried - tobacco threshed and re-dried on job work basis at others premises and then sells such threshed and re-dried tobacco leaves to others - tobacco leaves threshed and re-dried - tobacco threshed and re-dried on job work basis at others premises and then sells such threshed and re-dried tobacco leaves to others. HELD THAT - It is felt that 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 process. 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, Schedule- I of Notification No. 1/2017-Central Tax (Rate) and the entry no 3 inserted under the notification 4/2017 CGST (Rate) issued for liability under reverse charge mechanism and the relevant HSN code mentioned against the description of the commodity i.e., 2401. 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 transaction takes place in between the farmer and the trader on the auction platform. Further, as per the clarification issued by The Department TRU (Tax Research Unit) vide circular F.No.322/2/2017/Dec.2017, Tobacco Leaves means leaves of tobacco as such or broken leaves Tobacco Leaves stems . It clearly expresses that the leaves as long as they do not loose their basic character as leaves , shall be considered as tobacco leaves only. In the present case the applicant purchases the dried leaves on auction platform and trades the same to other dealers or exporters and further engaged in threshing and re-drying of tobacco leaves on job work basis for other traders or manufacturers. What is the rate of GST applicable on 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% as per the notification 4/2017-Central Tax (Rate), under Reverse charge . What will be the applicable rate of tax if the applicant purchases tobacco leaves from other dealers who have purchased them from farmers, for the purpose of trading? - HELD THAT - 5% (2.5% SGST 2.5%CGST) as per Sl.No.109 of schedule I Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. What will be the applicable rate of tax 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? - HELD THAT - 5% (2.5% SGST 2.5%CGST) as per Sl.No.109 of schedule 1 Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017. What will be the applicable rate of tax if the tobacco leaves are butted and sold to other dealers? - HELD THAT - 5% (2.5% SGST 2.5%CGST) as per Sl.No.109 of schedule 1 Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. What is the applicable rate of tax if the applicant gets the tobacco leaves re-dried without getting them threshed? - HELD THAT - 5% (2.5% SGST 2.5%CGST) as per Sl.No.109 of schedule 1 Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. What will be the applicable rate of tax if the applicant gets the tobacco leaves threshed and re-dried? - HELD THAT - 28% (14% SGST 14% CGST) as per Sl.No. 13 of Schedule IV Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. What will be the applicable rate of tax if the applicant gets the tobacco threshed and re-dried on job work basis at others premises and then sells such threshed and re-dried tobacco leaves to others? - HELD THAT - 28% (14% SGST 14% CGST) as per SI.No. 13 of Schedule IV Notification No.1/2017 Central Tax (Rate), dt.28.06.2017.
Issues Involved:
1. Rate of GST on tobacco leaves procured at auction platforms or directly from farmers. 2. Rate of GST on tobacco leaves purchased from other dealers. 3. Rate of GST on graded tobacco leaves. 4. Rate of GST on butted tobacco leaves. 5. Rate of GST on re-dried tobacco leaves without threshing. 6. Rate of GST on threshed and re-dried tobacco leaves. 7. Rate of GST on threshed and re-dried tobacco leaves on job work basis. Detailed Analysis: 1. Rate of GST on Tobacco Leaves Procured at Auction Platforms or Directly from Farmers: The ruling determined that the GST rate applicable to tobacco leaves procured at auction platforms or directly from farmers, which are cured and dried by the farmers themselves, is 5%. This is as per Notification No. 4/2017-Central Tax (Rate) under the 'Reverse charge' mechanism. 2. Rate of GST on Tobacco Leaves Purchased from Other Dealers: The applicable rate of GST when the applicant purchases tobacco leaves from other dealers who have sourced them from farmers for trading purposes is 5% (2.5% SGST + 2.5% CGST). This is in accordance with SI.No.109 of Schedule I Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. 3. Rate of GST on Graded Tobacco Leaves: When the applicant segregates the tobacco into grades based on size, color, shade, length, texture, etc., and sells such graded tobacco leaves, the applicable rate of GST remains 5% (2.5% SGST + 2.5% CGST). This is also as per SI.No.109 of Schedule I Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. 4. Rate of GST on Butted Tobacco Leaves: The GST rate applicable to tobacco leaves that are butted and sold to other dealers is 5% (2.5% SGST + 2.5% CGST). This falls under SI.No.109 of Schedule I Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. 5. Rate of GST on Re-dried Tobacco Leaves Without Threshing: For tobacco leaves that are re-dried without undergoing the threshing process, the applicable GST rate is 5% (2.5% SGST + 2.5% CGST). This is as per SI.No.109 of Schedule I Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. 6. Rate of GST on Threshed and Re-dried Tobacco Leaves: The ruling specifies that the GST rate for threshed and re-dried tobacco leaves is significantly higher at 28% (14% SGST + 14% CGST). This is in accordance with SI.No. 13 of Schedule IV Notification No.1/2017-Central Tax (Rate) dated 28.06.2017. 7. Rate of GST on Threshed and Re-dried Tobacco Leaves on Job Work Basis: If the applicant gets the tobacco leaves threshed and re-dried on a job work basis at another's premises and then sells such processed tobacco leaves, the applicable GST rate is 28% (14% SGST + 14% CGST). This is also as per SI.No. 13 of Schedule IV Notification No.1/2017 Central Tax (Rate) dated 28.06.2017. Conclusion: The judgment provides a clear distinction in GST rates based on the various stages and processes involved in handling tobacco leaves. The rate remains 5% for most unprocessed or minimally processed tobacco leaves, while more extensive processing like threshing and re-drying attracts a higher rate of 28%.
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