SHRI SHAILESH KUMAR SINGH

The Applicant is interested in trading of 'Dried tobacco leaves' purchased from registered dealer who in return purchases from Agriculturist/ Farmer (who harvested tobacco and then curing is done by the process of sun dry  or air dry). The Applicant after cleaning and removal of unwanted particles further sell such  'Dried tobacco leaves' in wholesale market without addition of any essence or foreign particle and without any branding on it. 

The Applicant has sought Advance Ruling on "Classification or rate of tax on 'Dried Tobacco Leaves' on which cleaning removal of unwanted particles has been done under Tariff Item/Heading 2401 as 'Tobacco Leaves'  taxable @ 5% or ' All goods not specified elsewhere' as mentioned in Notification No. 01/2017- Central Tax (Rate) dt. 28.06.17 taxable @ 28%"?

The Applicant submitted that 'Dried tobacco leaves' on which no processing /modification has been done are to be classified as 'Tobacco leaves' as per tariff code 2401 and taxable @ 5%. Also as per FAQ "for GST rate of 5%, tobacco leaves means leaves of tobacco as such or broken tobacco leaves or tobacco leaves stem".

HSN notes for heading 2401 specifically mention that it covers whole plants or leaves in the natural state and also cured and fermented leaves, hence even after process of curing and fermenting of Tobacco leaves, they remain covered under heading 2401. As per Notification no. 1/2017-Central Tax (Rate) Tobacco leaves attract 5% IGST vide s.no. 109 of Schedule I whereas unmanufactured tobacco (other than tobacco leaves) attracts 28% IGST vide s.no. 13 of Schedule IV.

However 'Tobacco leaves' in s.no. 109 of Schedule I of Notification no. 1/2017-Central Tax (Rate) as per Circular no. 332/2/2017 covers only those tobacco leaves which have not undergone any processing like curing, fermentation etc. and since the goods supplied by the applicant are admittedly undergone curing by Sun dry/ Air dry processes, the same cannot be called tobacco leaves and would be covered as unmanufactured tobacco (other than tobacco leaves).

Crux: The 'Dried Tobacco Leaves' which has undergone the process of curing after harvesting of tobacco leaves are 'unmanufactured tobacco' classified under S. No. 13 of schedule - IV of Notification No. 01/2017- Central Tax (Rate) @ 28% IGST.