'Kandi Ravo' a tobacco waste to be classified under tariff entry 24013000

The Gujarat Advance Ruling Authority has ruled that 'Kandi Ravo', a product made from crushed tobacco refuse mixed with clay and water, should be classified under tariff entry 24013000. This classification means the supply of 'Kandi Ravo' attracts a 28% Goods and Services Tax (GST). The ruling clarified that the process of making 'Kandi Ravo' does not constitute 'manufacture' as defined by the CGST Act.

The AAR, Gujarat, in the matter of Devendrakumar Rambhai Patel [Advance Ruling no. CUJ/GA ANN2O23/21 dated June 12, 2023] ruled that ‘Kandi Ravo’ the unmanufactured tobacco, made by crushing tobacco refuse and mixing it with natural clay & water is appropriately classifiable under tariff entry 24013000 and the assessee is liable to pay 28% GST on supply of such goods.

Facts

M/s. DevendrakumarRambhai Patel ("the Applicant") is engaged in the supply unprocessed tobacco which is properly known as ‘Kandi Ravo’ ("the goods"). The Applicant directly purchases the good from the farmers.

The Applicant states that the goods falls under the category of unmanufactured tobacco without tube lime. The Applicant further stated that the product is waste tobacco mixed with natural clay and water and the product is not altered. Moreover, the product is not used in pan masala and is never put in a paan. The Applicant was of the view that the product is sold in 30-35 kg bags & its price range is also not similar to that of chewing/scented tobacco.

Issue

What is the classification of 'Kandi Ravo' under GST?

Held

The AAR, Gujarat, in Advance Ruling no. CUJ/GA ANN2O23/21 held as under:

• Observed that, Section 2(72) of the Central Goods and Services Tax Act, 2017 ("the CGST Act") defines manufacture means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term "manufacturer" shall be construed accordingly. 
• Noted that, the process of making Kandi Ravo does not amount to manufacture as defined under Section 2(72) of the CGST Act.
• Observed, custom tariff heading 2401 which covers unmanufactured tobacco in the form of whole plants/leaves in natural state, cured or fermented leaves, whole, stemmed/stripped, trimmed/semi trimmed broken/cut, blended cased with a liquid of appropriate composition prevent drying and to preserve the flavour.
• Opined that, though the Applicant has undertaken the process of crushing tobacco refuse and thereafter mixing it with natural clay & water, in terms of the HSN notes, we find that it still remains an unmanufactured tobacco.
• Held that, the classification of Kandi Ravo will be under tariff entry 24013000 and attracts the GST liability of 28% GST in terms of Notification No. 1/2017-Central Tax (Rate) dated June 28, 2017.