AAAR Holds 5% Applicable GST on 'Nizam Pakku' betel nut

AAAR Holds 5% Applicable GST on 'Nizam Pakku' betel nut

The Tamil Nadu Appellate Authority of Advance Ruling (AAAR) while setting aside the order of the Authority of Advance Ruling (AAR) held that only 5 per cent Goods and Services Tax (GST) on "Nizam Pakku" betel nut.

The AAAR Coram consisting of Members M.A. Siddiqui and G.V. Krishna Rao held that the applicable GST rate for the product is 5 per cent only and set aside the AAR's order imposing 12 per cent of GST.

The factual matrix of the case was that the appellant company owned by Abdul Razak Safiullah was engaged in trading betel nut, under the name and style "Nizam Pakku" and the said brand name is owned and registered in favor of the Appellant.

"Pakku" is a Tamil term for "betel nut". "Nizam Pakku" is manufactured by M/s Azam Laminators Pvt Ltd who sells "Nizam Pakku" exclusively to the Appellant, which is marketed by them through the Dealers and Distributors network.

Issue

Whether the 'Nizam Pakku' bought and sold by the appellant attracts 2.5 per cent Central Goods and Services Tax (CGST) as per Sl. No. 28 of Schedule I of Notification 1/2017 Central Taxes (Rate), dated 28 June 2017 and equal rate of State Goods and Services Tax (SGST)?

The AAR ruled that "Nizam Pakku" traded by the appellant merits classification under Chapter 0802 80 90 of the Customs Tariff and attracts 6 per cent CGST as per SI.No. 15 of Schedule II under Notification 1/2017-Central Tax (Rate) dated 28 June 2017, and 6 per cent SGST under Notification No. II(2)/CTR/532(d-4)/2017 vide G.O.(Ms) No: 62 dated 29 June 2017, as amended.

An appeal was filed against the said order before the AAAR. It set aside the order of AAR and observed from the Commercial Invoice and the related Shipping Bill for Export, the product is described as 'Nizam Betel Nut (Arecanut)'.

The AAR noted in its ruling that the product of M/s S.A. Safiullah (appellant) is known as betel nut (areca nut). Hence, it should be assessed accordingly by the Customs.

The said observations were made by the appellant authority in its ruling after considering the appellant's claim held that the terms 'betel nut' and 'areca nut' are the same and used interchangeably. It held that the applicable GST rate would be 5 per cent instead of 12 per cent on the said product.