Classification of "Nizam Pakku" for GST: Essential character, Chapter 8, 6% CGST, 6% SGST

The product "Nizam Pakku" was classified under Chapter 0802 80 90 of the Customs Tariff, attracting 6% CGST and 6% SGST. The authority determined that the product retains the essential character of betel nut and should be classified under Chapter 8, not under Chapter 21. The applicable GST rate for "Nizam Pakku" was set at 6% CGST as per Notification 1/2017-Central Tax (Rate) and 6% SGST as per Notification No. II(2)/CTR/532(d-4)/2017.

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Issues Involved:
1. Classification of "Nizam Pakku" under the Customs Tariff.
2. Applicable GST rate for "Nizam Pakku".

Issue-wise Analysis:

1. Classification of "Nizam Pakku" under the Customs Tariff:

The applicant sought an advance ruling on whether "Nizam Pakku," a product made from betel nut, is classifiable under Chapter heading 0802 8030 of the Customs Tariff, attracting 2.5% CGST and an equal rate of SGST. The manufacturing process involves drying betel nuts, breaking them into smaller pieces, heating them with Vanaspati, and adding sugar, glucose syrup, menthol, and spices. The applicant argued that the product retains the essential character of betel nut and should be classified under Chapter 8, which includes edible fruits and nuts. They referenced Chapter Note 3 of Chapter 8, which allows certain treatments for additional preservation or stabilization, provided the essential character of the dried fruits or nuts is retained.

The applicant also submitted that the product has been classified under HSN 0802 9013 by the Tamil Nadu Food Safety and Drug Administration Department and has been exported under the same classification. They cited several judicial precedents, including decisions by the Supreme Court and CESTAT, which have classified similar products under Chapter 8.

The authority examined the relevant Customs Tariff items and Chapter Notes. Chapter 8 covers edible fruits and nuts, including areca nuts, while Chapter 21 includes "betel nut product known as supari." The authority noted that the product retains the essential character of betel nut, as confirmed by test reports and the manufacturing process, which involves permissible treatments under Chapter Note 3 of Chapter 8. Therefore, the product was classified under CTH 08028090 (Other) and not under CTH 21069030 (Betel nut product known as "Supari").

2. Applicable GST rate for "Nizam Pakku":

The applicable GST rates are notified under Notification No. 01/2017-C.T. (Rate) dated 28.06.2017. The authority referred to the GST Council Meeting minutes, which discussed the rate for areca nuts. It was decided that dried areca nuts, whether or not shelled or peeled, should be taxed at 5% if not called betel nut. However, the product in question is marketed as betel nut, and thus, the applicable rate is 6% CGST as per Sl. No. 15 of Schedule II of the said Notification.

Ruling:

"Nizam Pakku" traded by the applicant merits classification under Chapter 0802 80 90 of the Customs Tariff and attracts 6% CGST as per Sl.No. 15 of Schedule II under Notification 1/2017-Central Tax (Rate) Dt. 28.06.2017 and 6% SGST under Notification No. II(2)/CTR/532(d-4)/2017 vide G.O. (Ms) No. 62 dated 29.06.2017 as amended.

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