TMI Blog2023 (3) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... -Central Tax (Rate), in case of intra state supply of tobacco leaves, falling under 2401 by an agriculturist to a registered person, GST is to be paid under RCM by the recipient. Now agriculturist is defined under section 2(7) of the CGST Act, 2017 to mean an individual or a Hindu Undivided Family, who undertakes cultivation of land by own labour, or by the labour of family, or by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family. Therefore, in case of purchase of tobacco leaves/bhukko from the agriculturist, the applicant is liable to pay GST on RCM basis at 5% [2.5% CGST and 2.5% SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 109 of Schedule 1. The applicant is liable to pay GST on forward charge basis at 5% [2.5% CGST and 2.5% SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 109 of Schedule I, subject to the condition that they are engaged in trading of tobacco leaves/bhukko, procured from agriculturist, on as such basis i.e. without undertaking any further process on the same. Rate of GST in case of sale/supply of coated tobacco brok ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FCJ1399D1Z0. 2. The applicant, is engaged in the activity of procuring raw tobacco from farmers and consequent sale of unmanufactured tobacco. 3. The summary of the activity undertaken by the applicant, from the facts as mentioned in his application is as under viz:- Farmers sow sapling, which subsequently grow into a plant; The tobacco leaves are considered ready for harvesting once it changes its colour from normal green to yellowish green or light yellow; The leaves are separated from the main stem left on the open ground for natural drying curing process; Once completely dry, the harvest is then collected stored in a suitable dry location, wherein the bigger stems, the suckered leaves the main harvest is stored separately; This whole leaf or the broken leaf [formed during the course of bundling in gunny/jute bags] are thereafter procured from the farmer/agriculturist by the applicant; the broken leaf is also known as 'Bhukko' in common trade parlance; This is primarily used in bin manufacturing or chewing tobacco manufacturing. 4. It is the applicant's contention that they sell some part of this goods/product ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplicant thereafter has summarized his interpretation in reference to the facts of the case, which is as follows:- [a] procurement of raw tobacco leaves in broken form [RCM applies when brought from farmers]. 5% [b] trading of procured raw tobacco leaves in leaf form/broken form as is received from the farmers. 5% [c] broken tobacco leaves given for processing including process of layering ie coating on tobacco broken leaves to the registered person. 12% [d] supply [sales] of coated tobacco broken leaves in gunny bag. 28% 10. In view of the foregoing, the applicant is before us raising the following question for advance ruling viz,- (i) Whether for the purchase of raw tobacco from farmer [including naturally broken tobacco known as 'tobacco leaves or tobacco bhukko'] is covered under reverse charge mechanism? (ii) What would be the rate of tax in case of coating process is done on unmanufactured tobacco. If the applican ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst schedule of the Customs Tariff Act, 1975, including the section chapter notes and the General Explanatory Notes to the HSN of the first schedule of CTA, 1975 in terms of Explanation 1 to notification No. 1/2017-Central Tax (Rate), which reads as under:- (iii) Tariff item , sub-heading heading and Chapter shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975). (iv) The rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975), including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall, so far as may be. apply to the interpretation of this notification 17. Before moving on to decide the issue, it would be prudent to reproduce the relevant notification, chapter notes, HSN notes, etc., viz (A) [Notification No. 1/2017-Central Tax (Rate), dated 28-6-2017] Rate of Tax (Schedules) for specified goods under CGST - Schedules I to VI In exercise of the powers conferred by sub-section (I) of section 9 of the Central Goods and Services Tax Act. 2017 (12 of 2017) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te supply of such goods as specified in the corresponding entry in column (5) and all the provisions of the said Act shall apply to such recipient, namely :- TABLE S.No Tarilf item, sub-heading, heading or Chapter Description of supply of Goods Supplier of good Recipient of supply (1) (2) (3) (4) (5) 3. 2401 Tobacco leaves Agriculturist Any registered person (C) Notification No. 1/2017-Compensation Cess (Rate), dated 28-6-2017 Rates of Compensation Cess for specified goods In exercise of the powers conferred by sub-section (2) of section 8 of the Goods and Services Tax (Compensation to States) Act, 2017 (15 of 2017), the Central Government, on the recommendations of the Council, hereby notifies the rate of cess as specified in column (4) of the Schedule appended to this notification, that shall be levied on the intra-State supplies or interstate supplies of such goods, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prevent mould and drying and also to preserve the flavour are also covered in this heading. (2) Tobacco refuse, e.g., waste resulting from the manipulation of tobacco leaves, or from the manufacture of tobacco products (stalks, stems, midribs, trimmings, dust, etc.). (F) Notification No. 20/2019-C.T. (Rate), dated 30-9-2019 CGST rates for intra-State supply of specified services - Amendment to Notification No. 11/2017-C.T. (Rate) In exercise of the powers conferred by sub-sections (1), (3) and (4) of section 9, subsection (I) of section II, sub-section (5) of section 15. sub-section (1) of section 16 and section 148 of the Central Goods and Services Tax Act. 2017 (12 of 2017), the Central Government, on the recommendations of the Council, and on being satisfied that it is necessary in the public interest so to do, hereby makes the following further amendments in the notification of the Government of India, in the Ministry of Finance (Department of Revenue) No. 11/2017-Central Tax (Rate), dated the 28th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 690(E), dated the 28th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acco [tobacco leaves or bhukko] from farmer. The applicant in his summary clearly states that according to them they are liable for GST under RCM @ 5%. We find that in terms of Notification No. 4/2017-Central Tax (Rate), in case of intra state supply of tobacco leaves, falling under 2401 by an agriculturist to a registered person, GST is to be paid under RCM by the recipient. Now agriculturist is defined under section 2(7) of the CGST Act, 2017 to mean an individual or a Hindu Undivided Family, who undertakes cultivation of land by own labour, or by the labour of family, or by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family. Therefore, we agree with the applicant that in case of purchase of tobacco leaves/bhukko from the agriculturist, the applicant is liable to pay GST on RCM basis at 5% [2.5% CGST and 2.5% SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 109 of Schedule 1. 19. As a corollary to the above question, the applicant in the summary has also stated that according to them, in case of trading of the said procured raw tobacco leaves in leaf form/broken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UNMANUFACTURED TOBACCO; TOBACCO REFUSE 240110 - Tobacco , not stemmed or stripped : 24011010 --- Flue cured virginia tobacco kg. 30% - 24011020 --- Sun cured country (natu ) tobacco kg. 30% - 24011030 --- Sun cured virginia tobacco kg. 30% - 24011040 --- Burley tobacco kg. 30% - 24011050 --- Tobacco for manufacture of biris, not stemmed kg. 30% - 24011060 --- Tobacco for manufacture of chewing tobacco kg. 30% - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nmanufactured tobacco in the form of whole plants/leaves in natural state, cured or fermented leaves, whole, stemmed/stripped, trimmed/semi trimmed, broken/cut, blended cased with a liquid of appropriate composition mainly to prevent drying and to preserve the flavour. Now, as per the applicant, the purpose of coating the natural edible gum on the leaves, is to enhance its life, to preserve the nicotine content and further to ensure that it is not destroyed by bugs/insects. Thus, though the applicant has undertaken the above process of coating, consequent to the cleaning process, removal of unwanted substances thereafter cutting and grading of leaves procured from the agriculturist, in terms of the HSN notes, it still remains an unmanufactured tobacco. This is more so because even in terms of section 2(72) of the CGST Act, 2017, which defines manufacture, since no new product emerges post the coating process, we hold that the product is classifiable under CTH 2401 as ''unmanufactured raw tobacco leaves'. We further hold that the applicant is liable to pay GST at 28% [14 % CGST and 14 % SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 13 of Schedul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o from the agriculturist, the applicant is liable to pay GST on RCM basis at 5% [2.5% CGST and 2.5% SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 109 of Schedule I. Applicant is liable to pay GST on forward charge basis at 5% [2.5% CGST and 2.5% SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 109 of Schedule 1, in respect of trading of tobacco leaves/bhukko, procured from agriculturist, subject to the condition that they are engaged in trading of tobacco leaves/bhukko, procured from agriculturist, on as such basis i.e. without undertaking any further process on the same In case of supply of unmanufactured tobacco leaf consequent to coating the same with natural edible gum, the applicant is liable to pay GST at 28% [14 % CGST and 14 % SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 13 of Schedule IV. However, it is made clear that in case of supply of the said coated tobacco to the customers in gunny bag with their name being printed/mentioned on the gunny bags so as to identify the lot, then the applicant would be liable to pay GST at 28% [14 % CGST and 14 % SGST] in terms of notification No. 1/2017-Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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