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2020 (7) TMI 376 - AAR - GSTRate of GST - tobacco leaves procured at tobacco auction platforms or directly from farmers, which are cured and dried by farmers themselves - purchase of tobacco leaves form other dealers who have purchased them from farmers, for the purpose of trading - seggregation of 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 and sold - 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 - 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 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 under GST, there are four different entries for tobacco, one under Schedule-I. Liable @5% (CGST 2.5% and SGST 2.5%) and the remaining heads are in Schedule- IV liable 28% - And there is an entry of tobacco leaves under Reverse charge mechanism also. 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 or 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. Rate of GST on tobacco leaves (butted or re-dried) is 5% - Rate of GST will be 28% if the applicant gets the tobacco leaves threshed and re-dried.
Issues Involved:
1. GST rate on tobacco leaves procured from 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 re-dried tobacco leaves. 6. GST rate on threshed and re-dried tobacco leaves. 7. GST rate on threshed and re-dried tobacco leaves processed on a job work basis. Detailed Analysis: Issue 1: GST rate on tobacco leaves procured from auction platforms or directly from farmers The applicant purchases cured and dried tobacco leaves from auction platforms or directly from farmers. The ruling states that the GST rate applicable on such tobacco leaves is 5% under the reverse charge mechanism as per Notification No. 4/2017-Central Tax (Rate). Issue 2: GST rate on tobacco leaves purchased from other dealers When the applicant purchases tobacco leaves from other dealers who have sourced them from farmers, the applicable GST rate is 5% (2.5% SGST + 2.5% CGST) according to Sl.No.109 of Schedule I Notification No.1/2017-Central Tax (Rate). Issue 3: GST rate on graded tobacco leaves The applicant grades the tobacco leaves based on various parameters such as size, color, and texture. The ruling determines that the GST rate on such graded tobacco leaves remains 5% (2.5% SGST + 2.5% CGST) as per Sl.No.109 of Schedule I Notification No.1/2017-Central Tax (Rate). Issue 4: GST rate on butted tobacco leaves If the applicant performs butting on the tobacco leaves and sells them, the GST rate applicable is 5% (2.5% SGST + 2.5% CGST) as per Sl.No.109 of Schedule I Notification No.1/2017-Central Tax (Rate). Issue 5: GST rate on re-dried tobacco leaves For tobacco leaves that are re-dried without threshing, the applicable GST rate is 5% (2.5% SGST + 2.5% CGST) as per Sl.No.109 of Schedule I Notification No.1/2017-Central Tax (Rate). Issue 6: GST rate on threshed and re-dried tobacco leaves When the applicant gets the tobacco leaves threshed and re-dried, the GST rate applicable is 28% (14% SGST + 14% CGST) as per Sl.No.13 of Schedule IV Notification No.1/2017-Central Tax (Rate). Issue 7: GST rate on threshed and re-dried tobacco leaves processed on a 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 leaves, the applicable GST rate is 28% (14% SGST + 14% CGST) as per Sl.No.13 of Schedule IV Notification No.1/2017-Central Tax (Rate). Summary: The judgment provides clarity on the GST rates applicable to various stages of tobacco leaf processing and trading. It distinguishes between the rates for unprocessed tobacco leaves, which are taxed at 5%, and processed tobacco leaves (threshed and re-dried), which are taxed at 28%. The ruling emphasizes the importance of the specific processes performed on the tobacco leaves in determining the applicable GST rate.
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