2022 (12) TMI 949 - AAR - GST

Classification of goods - HSN Code - applicable rate of tax - Raula Gundi - HELD THAT - The resultant product of the applicant is a combination of various ingredients/raw materials intended for chewing needs. The predominant ingredient is 'Tobacco dust' which constitutes about 50% of the product and other ingredients are added to it as per required proportion to make it consumable. In the process of manufacturing the product, the raw materials used by the Applicant undergo a set of processes and emerge as 'Chewable Tobacco Gundi' which is marketable/consumable. Therefore, the product prepared and sold by the Applicant is a Manufactured Tobacco product for chewing . Once it is held that the product is 'Manufactured Chewing Tobacco', the classification of the product is under HSN Code 24039910 which specifies 'Chewing Tobacco' under the head 2403-Other manufactured tobacco . Further, as per Notification No.01/2017-Central Tax (Rate) dated 28.06.2017, the said item appears at Sr. No. 15 of Schedule-IV of the said notification on which GST liability is 28%. As per Notification No.01/2017-Compensation Cess(Rate) dated 28.06.2017, Chewing Tobacco (without lime tube) appears at SI. No.26 of the said notification (on which Compensation Cess is 160%) . Furthermore, it may be noted that the value for the purpose of GST computation will be the transaction value plus basic excise duty, NCCD and any other amount as prescribed in section 15 of the GST Act, 2017.

Summary

Issues:
1. Determination of HSN Code for 'Raula Gundi' (Final product of the Applicant)
2. Applicable rate of tax and Cess for the product

Analysis:

Issue 1: Determination of HSN Code
The Applicant sought an advance ruling to determine the Harmonized System Nomenclature (HSN) Code for their final product, 'Raula Gundi.' The Applicant described the manufacturing process involving the use of various raw materials like Tobacco dust, Bhaja dhania, Madhuri, Mala zira, Mustard oil, Epoil, and Lime. The Jurisdictional Deputy Commissioner opined that the product falls under Tariff Heading 24039910 due to the predominant ingredient, Tobacco. The Authority analyzed the composition and process, concluding that 'Raula Gundi' is classified as 'Chewing Tobacco' under HSN Code 24039910.

Issue 2: Applicable Rate of Tax and Cess
Regarding the applicable tax rate and Cess for the product, the Applicant claimed a GST rate of 28% (14% CGST + 14% SGST) and GST Cess at 72%. However, the Jurisdictional Deputy Commissioner stated that the tax rate for 'Raula Gundi' is 28% (CGST-14% + SGST-14%) with a Cess of 160%. The Authority observed that the product is a combination of ingredients primarily intended for chewing purposes, with Tobacco being the principal component. Consequently, the product is considered 'Chewing Tobacco' falling under Chapter 24 of the GST Tariff, attracting a GST rate of 28% and a Compensation Cess of 160%.

Conclusion:
The Authority ruled that the HSN Code for 'Raula Gundi' is '2403 9910,' classifying it as 'Chewing Tobacco (without lime tube).' The applicable GST rate for the product is 28% (14% CGST + 14% SGST), with a Compensation Cess of 160%. The ruling provided guidance for the Applicant's tax compliance. If dissatisfied, either party has the option to appeal to the Odisha State Appellate Authority for Advance Ruling within 30 days.