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‘Raula Gundi’ to be considered as chewing tobacco (without lime tube) which attracts 28% GST and 160% Compensation Cess

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‘Raula Gundi’ to be considered as chewing tobacco (without lime tube) which attracts 28% GST and 160% Compensation Cess
CA Bimal Jain By: CA Bimal Jain
January 4, 2023
All Articles by: CA Bimal Jain       View Profile
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The AAR, Odisha in IN RE: M/S. DAS & SONS - 2022 (12) TMI 949 - AUTHORITY FOR ADVANCE RULING, ODISHA has held that ‘Raula Gundi’ is nothing but a chewing tobacco (without lime tube) therefore, will be covered under HSN Code ‘2403 9910’ and will attract 28% Goods and Services Tax (“GST”) and 160% Compensation cess.

Facts:

M/s Das & Sons (“the Applicant”) is a manufacturer and supplier of ‘Raula Gundi’ (“the product”) to various Betel shops, grocery shops and tea shops under the cover of GST invoices. The Applicant stated that various raw materials are required for the preparation of the product like tobacco dust, bhaja dhania, madhuri, mala zira, mustard oil, epoil, lime etc. Further, tobacco dust is the predominantly used ingredient which constitutes about 50% of the product.

The Applicant has sought the advance ruling on the classification and applicable tax rate of the product.

The Applicant was of the view that the product is to be classified under HSN Code 2403 9920 and chargeable to 28% GST along with 72% GST Cess under the provisions of the Central Goods and Services Tax Act, 2017 (“the CGST Act”).

Issues:

  1. Whether the product ‘Raula Gundi’ is classified under HSN Code 24039920?
  2. What is the applicable rate of GST and Cess is chargeable on the product?

Held:

The AAR, Orissa in IN RE: M/S. DAS & SONS - 2022 (12) TMI 949 - AUTHORITY FOR ADVANCE RULING, ODISHA held as under:

  • Observed that, the product is a combination of various raw materials intended for chewing needs and predominant ingredient ‘Tobacco dust’ constitutes about 50% of the product and other raw materials are added to it as per required proportion to make it consumable.
  • Stated that, the very purpose of consuming this combination is that it has both stimulant and relaxation effects, but regular consumption of the same leads to addiction. It is believed to produce a sense of euphoria in the body which is akin to that of smoking. On this analogy and on common parlance, we would like to consider the product 'Raula Gundi' i.e chewable gundi as 'Chewing Tobacco', the principal/predominant ingredient of which is Tobacco.
  • Noted that, in the process of manufacturing, the raw materials undergoes various 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’.
  • Held that, the product is classifiable under HSN Code 2403 9910 which specifies ‘Chewing Tobacco’ under the head “2403- Other manufactured tobacco”.
  • Further held that, as per Notification No. 01/2017- Central tax (Rate) dated June 28, 2017 (“the Goods Rate Notification”), the product appears at Sr. No. 15 of Schedule- IV on which 28% [14% CGST + 14% SGST] is levied. Further, as per Sl. No. 26 of Notification No. 01/2017- Compensation Cess (Rate) dated June 28, 2017 (“the Cess Rate Notification”), Chewing Tobacco (without lime tube) attracts 160% Compensation Cess.

Relevant Provisions:

SI. No. 15 to Schedule IV of the Goods Rate Notification:

S. No.

Chapter / Heading / Subheading / Tariff item

Description of Goods

“15.

2403

Other manufactured tobacco and manufactured tobacco substitutes; “homogenised” or “reconstituted” tobacco; tobacco extracts and essences including biris”

SI. No. 26 of the Cess Rate Notification:

S. No.

Chapter / Heading / Sub-heading / Tariff item

Description of Goods

Rate of goods and services tax compensation cess

“26.

2403 99 10

Chewing tobacco (without lime tube)

160%”

(Author can be reached at info@a2ztaxcorp.com)

 

By: CA Bimal Jain - January 4, 2023

 

 

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