The Authority for Advance Ruling (AAR), Gujarat has held that ‘Kandi Ravo’ Tobacco Waste sold without Brand Name & Labelling shall be classified as Unmanufactured Tobacco Refuse and shall attract 28% Goods and Services Tax (GST) but no CompensationCess shall be applicable for the same.
The ruling was issued in response to an application made by M/S. Devendrakumar Rambhai Patel, a wholesale/retail trader of unprocessed tobacco based in Gujarat has provided clarity on the classification and applicable Goods and Services Tax (GST) rate under the Central Goods and Services Tax (CGST) and State Goods and Services Tax (SGST) Acts, 2017 for the product known as ‘Kandi Ravo’ which is a type of tobacco waste.
The applicant, represented by Devendra R Patel, C A Hiral C Patel, C A Bhavik Prajapati and A R Patel explained that the product is obtained by crushing tobacco waste and mixing it with natural clay and water.
The applicant emphasized that the nature of the product remains unchanged, and it is primarily used by tobacco manufacturers.
It was also argued that ‘Kandi Ravo’ should be classified as unmanufactured tobacco without lime tube and should not be subject to the GST compensation cess.
The Authority consisting of Milind Kavatkar (SGST Member) and Amit Kumar Mishra (CGST Member) noted that the process undertaken by the applicant did not result in the emergence of a new product with a distinct name, character, and use, as per the definition of “manufacture” under the CGST Act, 2017. Therefore, the authority concluded that ‘Kandi Ravo’ should be classified as unmanufactured tobacco refuse under Chapter 24, tariff item 24013000.
The Authority referred to the relevant provisions of the Customs Tariff Act, 1975 and Notification No. 1/2017-Central Tax (Rate) and Notification No. 1/2017-Compensation Cess (Rate).
The AAR highlighted that the applicant’s product, when sold without any brand name or labelling in 30-35 kg bags, falls under Schedule IV of the GST rate notifications. As per the ruling, the applicant would be liable to pay GST at a rate of 28%, comprising 14% CGST and 14% SGST.
The ruling clarified that if the applicant sells ‘Kandi Ravo’ with a brand name or labelling, different considerations may apply. However, since the applicant confirmed that no such branding or labelling is used, they are required to pay GST at the prescribed rate without any compensation cess, the AAR held.
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