BRAND NAMES & COMPENSATION CESS., Goods and Services Tax - GST

[Sadanand Bulbule]

Dear Sirs

Under the GST(Compensation Cess Act,2017) different rates of Compensation Cess are prescribed besides the levy of applicable CGST/SGST/IGST/UTGST on notified goods as the case may be.

A dealer who supplies certain goods in bulk under some "brand name" and collects the applicable GST and Cess too to another registered dealer. Later the buying dealer who the supplies "those" goods in very very small quantity along with some incidental services in "unbranded name" to the end consumers.Under such peculiar circumstances, whether the second supplier of those specific goods together with some incidental services need to pay the same rate of Cess as paid on "branded name" or is eligible to collect and the rate of Compensation Cess on supply of those goods in"unbranded name" format.

Pl clarify the legal position with any citations.

Posts / Replies

[YAGAY andSUN]

What are the goods involved in this transaction?

[Sadanand Bulbule]

Sir,

Really it is amazing to acknowledge your marathon efforts in answering the unanswered queries.

In this particular case, the goods involved are" Hookah" for joint smoking by couple of prospective smokers in the dedicated hookah smoking zones.

in typical hookah shisha.

As usual, please continue your efforts on this issue too.

With regards.

[YAGAY andSUN]

The moot question is that whether Hooka will be treated at par with Other cigarettes containing tobacco or not? If yes, then on the sale of this item, Cess will be payable.

Further, input tax credit can be availed on GST Cess paid on inward supplies of the above mentioned notified goods. However, the credit of GST Cess paid can be utilized only towards payment of the GST Cess liability.

[Sadanand Bulbule]

Sir

In continuation of your reply, please find the below further details. My understanding in this case is like this:

It is to be noted that a significant percentage of the hookah services effected are tobacco free. Such supplies without ‘tobacco’ consists of only organic flavours like honey, molasses, green apple etc.,Consequently, such supplies of hookah used for smoking in a water pipe without tobacco.

Notification No. 01/2017 – Compensation Cess (Rate) dated 28.06.2017 prescribes the rate of Compensation Cess to be charged on supply of specified goods or services. Entry No 19 and 20 of the said Notification provides for the rate of Compensation Cess payable on supply of “’Hookah’ or ‘gudaku’ tobacco bearing / not bearing a brand name. An extract of the said 2 entries is produced below for your immediate reference:

19. 2403 11 10 - 'Hookah' or 'gudaku' tobacco bearing a brand name – 72%

20. 2403 11 10 – ‘Tobacco used for smoking 'hookah' or 'chilam' commonly known as 'hookah' tobacco or 'gudaku' not bearing a brand name – 17%.

Keeping in mind the spirit of the above Notification, the moot question is, when assorted Hokaah blended as per the specific choice of the customers, which normally is combination of many verities of flavors as mentioned above, naturally the supply of hookah is unbranded or without bearing a brand name.

Facts being so, I am of the considered opinion that such type of " Hokaah not bearing a brand name" shall be liable for Compensation Cess @17% under below classified HSN.

20. 2403 11 10 – ‘Tobacco used for smoking 'hookah' or 'chilam' commonly known as 'hookah' tobacco or 'gudaku' not bearing a brand name – 17%.

Please share your valuable comments on this issue.

Regards.