AI Drafter 
TaxTMI 
TaxTMI 
2020 (7) TMI 376
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...., for the purposes of this Advance Ruling, a reference to such a similar provision under the CGST or AP GST Act would be mentioned as being under the GST Act. 3. Brief Facts of the case: The applicant is registered under GST Nide GSTIN: 37AAHFD1174H1ZI and also registered with the Tobacco Board as a packer and exporter of Tobacco. The applicant deals in purchase and sale of tobacco of all varieties and forms. He also undertakes the operations of threshing and re-drying of tobacco leaves to make the agricultural produce marketable, mostly in overseas market. After the introduction of GST, Tobacco is brought under the taxability from the stage of tobacco leaves. The applicable rates of unmanufactured tobacco are covered under two heads under the tariff which are as under vide Notification No.1/2017-Central Tax (Rate) dt.28.06.2017, both having the same HSN Code of 2401, as shown below: SI.No Schedule HSN Product Description Rate of GST 1 Schedule - Sl. No. 109 2401 Tobacco Leaves CGST 2.5%+SGST 2.5% i.e. total GST = 5% 2 Schedule - IV; Sl. No. 13 2401 Unmanufactured Tobacco; tobacco refuse (other than tobacco leaves) CGST 14 % +SGST ....
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.... very rare and occasional requirement of the buyer and only 2 to 3% of the total tobacco is ordered for butting. If the buyer requires the leaf to be butted, the same is undertaken along with grading by manual labour and then packed by wrapping jute bags. Stripping / Steaming Process: The graded tobacco leaves or the butted leaves are at this stage, stripped wherein the stem portion of the Tobacco leaves is separated from the leaf. The lamina portion and the woody portion i.e mid-rib (stern) of tobacco leaf are to be separated as they are to be processed separately. Bundling Process: The graded tobacco leaves will be bundled as per the requirement of customer. This bundled tobacco is further processed into Threshed lamina or Re-dried leaf as such depending upon the requirement of the customer. Re-drying of tobacco leaves: Re-drying of tobacco is compulsory whether it is in the form of leaf as such or hand stripped form or threshed lamina form. This process is mainly done to remove un-even moisture levels in the tobacco leaf and to add required level of moisture evenly for storing the tobacco leaves long time. Re-drying will not alter the shape or physical or chemi....
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....TION 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 on the process of threshing and re-drying of tobacco leaves, saying that these are intermediate production processes carried out in relation to agriculture and are exempt from service Tax. After the introduction of GST, Tobacco is brought under the taxability from the stage of tobacco leaves itself. The applicable rates of unmanufactured tobacco are covered under two heads under the tariff which are as under vide Notification No.1/2017 - Central Tax (Rate) dt:28.06.2017, both having the same HSN Code of 2401, as shown in Para No 3 above. Though there is clarity as to the product description in the above two headings, since the terms 'Tobacco leaves and 'unmanufactured Tobacco (other than tobacco leaves)' are not defined in the Tariff, the applicant claims that classification of the commodity at various stages in the above specified heads may be a contentious issue.....
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.... the levy of GST on the tobacco leaves. The applicant states that all of the tobacco crop that is produced shall have to be cured before it can be marketed commercially in the primary market. And the tobacco that is cured and brought to auction platforms is only called tobacco leaves. In the common parlance, tobacco leaves mean cured (dried) tobacco leaves only as the green tender is unfit for any commercial operations. In this context, the applicant takes shelter under the following case law. The applicant affirms that his stance is upheld in various celebrated cases like M/s D.S. Bist & sons Nainital 1979 (04) SCC 0741 = 1979 (9) TMI 168 - SUPREME COURT wherein a mention is made about the agricultural produce. It says that it should be remembered that almost every kind of agricultural produce has to undergo some kind of processing or treatment by the agriculturist himself in his farm or elsewhere. In order to bring them to a condition of non-perishability and to make them transportable and marketable, some minimal process is necessary to be applied to many varieties of agricultural produce. But there may be some other kinds of agricultural produce which require some more pr....
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....ther letter, the CTRI has opined as follows: "The curing (drying) is an integral process of agricultural operations, like in case of any other agricultural products. The curing operations followed in India are dependent on several factors such as type of tobacco, convenience, agricultural infrastructure etc. The four prevalent methods of curing are (i) flue-curing (ii) air-curing (iii) fire-curing and (iv) sun-curing. The main characteristics of tobacco leaf viz., Nicotine and sugars will remain unaltered by the process of curing/drying Further applicant contends that it is a settled legal position that an entry in the tariff has to be read 'as it is' following the principle of literal Rule of interpretation and the 'word', 'term' or a 'phrase' shall not be read by affixing or suffixing another word to it. In the above entry, the term 'Tobacco Leaves' is mentioned without any qualifier attached to it viz., 'dried tobacco leaves', `undried tobacco leaves', 'cured tobacco leaves' etc., In such cases, it cannot be read that tobacco leaves means only those leaves cut from the plants and tobacco leaves on which cert....
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....HORITY FOR ADVANCE RULING, ANDHRA PRADESH, in the case of application filed by M/s. Pragathi Enterprises, which has given a ruling that the rate of GST applicable for tobacco supplied at all the below mentioned stages shall be 5% only. (i) Tobacco leaves procured at tobacco leaves platforms directly or from farmers; (ii) On tobacco leaves purchased from other dealers who has in turn purchased from farmers for the purpose of trading; (iii) When tobacco leaves are graded basing on their color, width etc and when such graded leaves are sold; (iv) On tobacco leaves butted and sold to other dealers; (v) On tobacco leaves re-dried without threshing. In view of all the above, the applicant is of the view that the following commodities that the applicant deals with, will fall under the head 'Tobacco Leaves' only and the applicable rate is 5% only: (a) Tobacco leaves in Cured form procured from farmers directly in case of Non-FCV tobacco and at Tobacco Auction Platforms in case of FCV tobacco. (b) Tobacco leaves traded between dealers of tobacco without rendering any further processes, what so ever. (c) Tobac....
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....s under GST, there are four different entries for tobacco, one under Schedule-I. Liable @5% (CGST 2.5% and SGST 2.5%) and the remaining heads are in Schedule- IV liable 28% (CGST-14% and SGST 14%). And there is an entry of tobacco leaves under Reverse charge mechanism also as explained below: As per the notification 4/2017 CGST (Rate), the supply of the Tobacco Leaves shall be under 'Reverse charge' No Tariff item sub-heading, heading or chapter Description of supply of Goods Supplier of goods Recipient of goods 3 2401 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 u....