The Gujarat Authority for Advance Ruling (GAAR) in the case of M/s JCP Agro Process Pvt. Ltd. vide Advance Ruling No. GUJ/GAANN2O23/11 dated 09.03.2023, has ruled that 5% GST would be payable under reverse charge mechanisms (RCM) on the purchase of tobacco leaves/bhukko from the agriculturist.

In this case, the applicant is engaged in the activity of procuring raw tobacco from farmers and making a consequent sale of unmanufactured tobacco. The applicant sought an advance ruling on whether the purchase of raw tobacco from farmers, including naturally broken tobacco known as “tobacco leaves or tobacco bhukko,” is covered by the reverse charge mechanism. Also, what would be the tax rate applicable in the case of coating processes done on unmanufactured tobacco.

The applicant contended that the coating is done to retain the characteristics of the unmanufactured raw tobacco leaf for a longer period of time. It helps preserve the nicotine content and protects the leaf from getting destroyed by bugs; it is not affected by natural moisture on account of the coating.

The GAAR noted that the term “agriculturist” is defined under Section 2(7) of the CGST Act, 2017. Agriculturist refers to an individual, or Hindu undivided family, who undertakes the cultivation of land by his or her own labor, by the labor of family members, by servants on wages payable in cash or kind, or by hired labor under personal supervision. In terms of Notification No. 4/2017-Central Tax (Rate), in the case of intrastate supply of tobacco leaves, falling under 2401, by an agriculturist to a registered person, GST is to be paid under RCM by the recipient.

The GAAR held that in the case of the supply of unmanufactured tobacco leaf subsequent to coating the same with natural edible gum, the applicant is liable to pay 28% GST.