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TMI Blog2019 (11) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... ant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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. - AAR No.15/AP/GST/2019 - - - Dated:- 26-3-2019 - D. RAMESH, AND S. NARASIMHA REDDY, MEMBER Represented by : Y. Srinivasa Reddy, Advocate ORDER (Under sub-section (4) of Section 98 of Central Goods and Services Tax Act, 2017 and sub- section (4) of Section 98 of Andhra Pradesh Goods and Services Tax Act, 2017) 1. The present application has been filed u/s 97 of the Central Goods Services Tax Act, 2017 and AP Goods Services Tax Act, 2017 (hereinafter referred to CGST Act and APGST Act respectively) by Polisetty Somasundaram Tobacco Threshers Private Limited, Guntur (hereinafter referred to as applicant), registered under the Goods Services Tax. 2. The provisions of the CGST Act and APGST Act are identical, except for certain provisions. Therefore, unless a specific mention of the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the tobacco leaves from other dealers and sell them to the clients within India and overseas. (c) Threshing and re-drying of the tobacco leaves in their threshing premises and selling them to the clients in India and to export to various countries. (d) Engaging in threshing and re-drying of tobacco leaves on job work basis for other traders or manufacturers. In the case of sale of tobacco leaves, the applicant may undertake the following minimal process on the tobacco before supplying as per the requirement of the dealer: Grading : The applicant may get an order from the buyers to grade the tobacco. In such cases, the applicant engages manual labour to segregate or classify the tobacco leaves into various grades depending on their size (width), length, colour or shade and other physical parameters of the leaf. These activities will be performed manually by unskilled labour and who will open the bale and separate the tobacco leaves to physically grade the tobacco into different categories as stated above. The tobacco leaves so graded, will again be packed into bales and wrapped in Jute bags for onward supply to other tobacco dealers or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? (g) 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? On Verification of basic information of the applicant, it is observed that the applicant falls under State jurisdiction, i.e. Assistant Commissioner (ST), Kothapet, Narasaraopet Division. Accordingly, the application has been forwarded to the jurisdictional officers with a copy marked to the Central tax authorities, Deputy Commissioner (Central Tax), Guntur Division, Guntur to offer their remarks as per the Section 98(1) of CGST/APGST Act 2017. The jurisdictional officers concerned responded that there are no proceedings passed or pending relating to issue on which Advance Ruling is sought by the applicant. 6. APPLICANT S INTERPRETATION OF LAW AND FACTS: Prior to the introduction of GST, the products of Tobacco leaves and unmanufactured tobacco were not leviable to tax under VAT and Central Excise Laws. The Hon ble Customs, Central Excise and Service Tax appellate Tribunal, Hyderabad had set aside the service tax demand raised o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acco partly or wholly stemmed or stripped. 2401 20 10 Flue Cured Virginia Tobacco 2401 20 20 Sun cured Country (Natu) Tobacco 2401 20 30 Sun cured Virginia Tobacco 2401 20 40 Burley Tobacco 2401 20 50 Tobacco for manufactures of Bidis, not stemmed 2401 20 60 Tobacco for manufactures of Chewing tobacco 2401 20 70 Tobacco for manufactures of cigar and cheroot 2401 20 80 Tobacco for manufactures of Hookah tobacco 2401 20 90 Other The tobacco leaves are supplied/ sourced in various stages but in all of which there was no change in form of the leaves except some minimal activities done on them to make them marketable. With the above entries in the tariff and also the clarifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es mean only cured tobacco because it is impossible to undertake any commercial activity on green tobacco as plucked from the crop. From the stage of cured tobacco, the common understanding of the term tobacco leaves stretches upto the stage of threshed and redried tobacco. As per the GST Tariff both Tobacco Leaves and Unmanufactured tobacco (other than tobacco leaves) fall under the same HSN 2401 and the words are not defined specifically in the said notification. As per explanatory notes to HSN 2401 Unmanufactured Tobacco is defined and the same is reproduced below. 2401 - Unmanufactured tobacco; tobacco refuse: 2401.10 - Tobacco, not stemmed/ stripped 2401.20 - Tobacco, partly or wholly stemmed/ stripped 2401.30 - Tobacco refuse This heading covers: Unmanufactured tobacco in the form of whole plants or leaves in the natural st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o leaves , shall be under stood in its natural and commercial meaning. Further the Tax Research Unit of CBIC in its Circular No.332/2/2017-TRU clarified as under: Q. 42. Tobacco leaves falling under heading 2401 attracts 5% GST on reverse charge basis in respect of supply by an agriculturist. What is the meaning of Tobacco leaves? Reply: For GST Rate 5%, tobacco leaves means, leaves of tobacco as such or broken tobacco leaves or tobacco leaves stems . The applicable rates of GST for goods were mentioned in Notification No. 1/2017-CT ibid. It is not mentioned as to who shall be supplier and who shall be recipient. While Notification No.4/2017 - CGST(Rate) dt.28.06.2017 notifies the cases where the RCM (Reverse Charge Mechanism) shall be applied, it is silent as to the rate. Thus, as long as the product remains the same, it does not matter whether the same is procured from an agriculturist or an unregistered dealer, or registered dealer. The application of RCM is only to prescribe as to who shall pay the tax and it had no bearing on the applicability of the rate of GST. Thus, the applicant contends that the commodities dealt by him fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to minimum manual process like grading, butting or re-drying, where no physical or chemical changes are happening to the leaves. (d) Tobacco leaves that are threshed and re-dried, where only the tobacco leaves are as such but are in broken form. 7. RECORD OF PERSONAL HEARING: Sri Y. Srinivasa Reddy the authorized representative of the Applicant company appeared for personal hearing on 01.02.2019 and they reiterated the submission already made in the application. Further the representative of the applicant, appeared before this authority on 18.02.2019 and submitted additional material along with physical samples of their commodity explaining different stages of processing. The applicant further submitted a costing sheet on 02-03-2019, wherein the value addition made at different levels is presented, of the activities being under taken by him, like butting, threshing, etc. 8. DISCUSSION AND FINDINGS: We have examined the issues raised in the application. The taxability, classification, applicable rate of tax, for the goods supplied as governed under the provisions of respective GST Acts are examined. The applicant is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tobacco Leaves Agriculturist Any registered person 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. It is to note that though there are different entries with respect to tobacco there is a specific entry in Schedule I of Notification 1/2017 (CGST Rate) as Tobacco leaves, and for the same the liability was brought under reverse charge mechanism. Hence it is clear that the commodity tobacco leaves is distinct from the other entries in this aspect. 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 cir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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