Order Date – 09 March 2023

Facts –

• The Applicant, M/s. JCP Agro Process P Ltd., is engaged in the activity of procuring raw tobacco from farmers and consequent sale of unmanufactured, tobacco. The applicant also engaged in sale/supply of coated tobacco broken leaves in gunny bag.

Issue –

• Whether raw tobacco from farmer is covered under reverse charge mechanism and what would be the rate of tax in case of coating process is done on unmanufactured tobacco?

Order –

• The AAR observed that in case of purchase of tobacco leaves/bhukko from the agriculturist, the applicant is liable to pay GST on RCM basis at 5% [2.5% CGST and 2.5% SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 109 of Schedule I.
• It was also held that the applicant is liable to pay GST on forward charge basis at 2.50% CGST and 2.5% SGST in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. 109 of Schedule I, subject to the condition that they are engaged in trading of tobacco leaves/bhukko, procured from agriculturist, without undertaking any further process on the same.
• In terms of section 2(72) of the CGST Act, 2017, which defines manufacture, since in the present case no new product emerges post the coating process, it was held that the product is classifiable under CTH 2401 as 'unmanufactured raw tobacco leaves'. Further held that the applicant is liable to pay GST at 28% [14 % CGST and 14 % SGST] in terms of notification No. 1/2017-Central Tax (Rate), Sr. No. l3 of Schedule IV.
• It was further held that in term of Circular No. 126/45/2019-GST the applicant is liable for payment of GST at the rate of 12% (6% CGST and 6% SGST) in terms of notification No. 20/2019- C.T. (Rate), dated 30-9-2019 on the job work process of coating done in respect of tobacco leaves supplied by other registered persons.