AAR classifies Raula Gundi as manufactured chewing tobacco under HSN 24039910, attracting 28% GST plus 160% compensation cess

The AAR classified Raula Gundi as manufactured chewing tobacco under HSN Code 24039910, attracting 28% GST and 160% compensation cess. The product, comprising 50% tobacco dust with other ingredients, undergoes manufacturing processes to become consumable chewable tobacco. The authority determined that despite being a combination product, tobacco dust's predominance makes it manufactured tobacco for chewing purposes. GST computation includes transaction value plus basic excise duty, NCCD, and other prescribed amounts under section 15 of GST Act, 2017.

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Issues:
1. Determination of HSN Code for 'Raula Gundi' (Final product of the Applicant)
2. Applicable rate of tax and Cess for the product

Analysis:

Issue 1: Determination of HSN Code
The Applicant sought an advance ruling to determine the Harmonized System Nomenclature (HSN) Code for their final product, 'Raula Gundi.' The Applicant described the manufacturing process involving the use of various raw materials like Tobacco dust, Bhaja dhania, Madhuri, Mala zira, Mustard oil, Epoil, and Lime. The Jurisdictional Deputy Commissioner opined that the product falls under Tariff Heading 24039910 due to the predominant ingredient, Tobacco. The Authority analyzed the composition and process, concluding that 'Raula Gundi' is classified as 'Chewing Tobacco' under HSN Code 24039910.

Issue 2: Applicable Rate of Tax and Cess
Regarding the applicable tax rate and Cess for the product, the Applicant claimed a GST rate of 28% (14% CGST + 14% SGST) and GST Cess at 72%. However, the Jurisdictional Deputy Commissioner stated that the tax rate for 'Raula Gundi' is 28% (CGST-14% + SGST-14%) with a Cess of 160%. The Authority observed that the product is a combination of ingredients primarily intended for chewing purposes, with Tobacco being the principal component. Consequently, the product is considered 'Chewing Tobacco' falling under Chapter 24 of the GST Tariff, attracting a GST rate of 28% and a Compensation Cess of 160%.

Conclusion:
The Authority ruled that the HSN Code for 'Raula Gundi' is '2403 9910,' classifying it as 'Chewing Tobacco (without lime tube).' The applicable GST rate for the product is 28% (14% CGST + 14% SGST), with a Compensation Cess of 160%. The ruling provided guidance for the Applicant's tax compliance. If dissatisfied, either party has the option to appeal to the Odisha State Appellate Authority for Advance Ruling within 30 days.

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