The Gujarat Bench of the Goods and Services Tax ( GST ) Appellate Authority for Advance Ruling ( AAAR ) has upheld a ruling classifying herbal cigarettes under HSN 24029010, levying 28% GST along with compensation cess.
The appeal, filed by Aorom Herbotech, challenged an earlier ruling by the Gujarat Authority for Advance Ruling (AAR), which rejected the firm’s claim that its herbal smokes are medicinal and instead categorized them as substitutes for conventional tobacco cigarettes.
Aorom Herbotech argued that their product, made from natural ingredients like tendu leaves and clove, lacks nicotine or tobacco and should be categorized as an Ayurvedic medicinal product under HSN 3004, which attracts a lower GST rate. The AAAR, however, concluded that the product aligns with the description of substitutes for tobacco-based cigarettes.
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The AAAR emphasized that the company failed to substantiate claims that the product adheres to Ayurvedic texts or practices. The firm also lacked licensing for Ayurvedic medicine manufacturing, a significant factor in the decision.
The authority highlighted the distinction between medicinal cigarettes (excluded from Chapter 24) and those intended as substitutes for recreational smoking.
The authority bench of Central GST Member B V Siva Naga Kumari and State GST Member Rajeev Topno noted that, the herbal cigarettes are non-medicinal and are subject to the maximum GST rate of 28%, coupled with compensation cess.
It was observed that, “What this re-confirms is what was stated during the course of personal hearing – that the appellant does not hold any license for manufacture of Ayurvedic medicine from any Regulatory Body, permitting them to manufacture the said goods, which as per their claim is a medicine.
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