GST on Tobacco Leaves Procured

Tobacco is obtained from various cultivated varieties and has multiple varieties based on size and shape. Tobacco may be cured either as whole plant (on the stalk) or as separate leaves. Before packing for shipment, the dried leaves are treated in order to ensure their preservation.

Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017

Rates Effective Rates Ch/(Sub)Heading/Tariff Item Description of Goods
2.5% 5% 2401 Tobacco leaves
14% 28% 2401 Unmanufactured tobacco; tobacco refuse (other than tobacco leaves)

FAQs on GST Rate-II dated 03.08.2017 

S.No. Question Answer
28 Tobacco leaves falling under heading 2401 attract 5% GST on reverse charge basis in respect of supply by an agriculturist? Yes, GST rate of 5% on reverse charge basis.
42 What is the meaning of tobacco leaves? Tobacco leaves means leaves of tobacco as such or broken tobacco leaves or tobacco leaves stems

In re Shri Shalesh Kumar Singh (AAR Delhi) – Advance Ruling No. 04/DAAR/2018 dated 06/04/2018

It is held that the ‘Dried Tobacco Leaves’ which have undergone the process of curing after harvesting of tobacco leaves are ‘unmanufactured tobacco’ covered in HSN Code 2401.

However, they are not covered under Schedule-1 of Notification No. 1/2017@ 2.5%, but the same are covered under Schedule- IV of the said Notification as ‘unmanufactured Tobacco (other than Tobacco Leaves)’ @ 14%.

In VST Industries Ltd. (AAR – ANDHRA PRADESH) dated 26 April,2019

Issue Involved

  • What is the rate of GST applicable on tobacco leaves procured at tobacco auction platforms or directly from farmers, which are cured and dried by farmers themselves?
  • What will be the applicable rate of tax if the applicant purchases tobacco leaves from other dealers who have purchased them from farmers, for the purpose of trading or if the applicant segregates the tobacco into grades depending upon their size (width), colour /shade, length, texture of the leaf etc., and sells such graded tobacco leaf or if the tobacco leaves are butted and sold to other dealers or if the applicant gets the tobacco re-dried without getting them threshed?
  • What will be the applicable rate of tax if the applicant gets the tobacco leaves threshed and re-dried or if the applicant gets the tobacco threshed and re-dried on job work basis at others’ premises and then sells such threshed and re-dried tobacco leaves to others or if the applicant gets the service of stripping of tobacco leaves by the service providers without getting them threshed and sold such stripped tobacco leaves to others ?
  • What is the applicable rate of tax if the applicant gets the service of bundling of tobacco leaves by the service providers and then the bundled leaves are sold to others?

Observation/Judgment

The GST rate for the tobacco leaves procured at tobacco auction platforms or directly from farmers, which are cured and dried by farmers themselves is 5%,under ‘Reverse charge’ in all cases.

This content is meant for information only and should not be considered as an advice or legal  opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

Posted by:

CA Tarun Kapoor

AKGVG & Associates

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