No GST Ruling Issued for Tobacco Commission Agent Due to Panel Disagreement
The Andhra Pradesh tax panel issued no ruling for Jayalakshmi Tobacco Company after its members disagreed on GST for tobacco commission agents.
- Ruling
- Order No. 03 /AAR/AP/GST/2018 dated 08.06.2018
- Dated
- 08 Jun 2018
- Authority
- Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Jayalakshmi Tobacco Company asked if GST applies to tobacco commission agents
- State and Central tax members expressed completely opposite views on GST exemption
- No official ruling was issued because the panel failed to reach a consensus
- The case was referred to the Appellate Authority for Advance Ruling for decision
In short
A tobacco commission agent in Andhra Pradesh asked the tax department whether Goods and Services Tax (GST) applies to auctioning tobacco leaves for farmers and traders, and whether agents with turnover under Rs. 20 lakh must register. The panel at the Authority for Advance Ruling (AAR) could not answer because the State tax officer and Central tax officer strongly disagreed with each other.
What has changed
How it worked before
Before this case, commission agents selling agricultural goods like tobacco leaves had conflicting assumptions about whether their services were fully exempt from GST or required mandatory registration.
What has changed
Nothing changed regarding tax liabilities because the authority failed to issue a verdict under order AAR/AP/03(GST)/2018. The State tax officer felt sales for traders attract GST, while the Central tax officer felt agricultural commission agents are fully exempt. Because of this deadlock, the matter was forwarded to the Appellate Authority for Advance Ruling (AAAR) without setting any tax rule.
Who this affects
Commission agents and auctioneers dealing in tobacco leaves and other agricultural produce for farmers or traders.
An example
A trader in Guntur operates as a commission agent selling tobacco leaves for local farmers, earning Rs. 15 lakh annually. They look up order AAR/AP/03(GST)/2018 to decide if they can stop collecting GST. They discover that the tax officers on the panel disagreed, leaving the case unresolved, so they cannot use this document to claim a GST exemption.
What you should do
Do not rely on the individual opinions expressed in a split decision, as they carry no legal authority. An advance ruling applies only to the business that requested it, and since no ruling was issued here, businesses must consult a tax advisor or file a fresh application for their own operations.
If you do nothing
If a business relies on the favorable opinion of one member in a split decision, tax officers during an audit can reject it. The business could face demands for unpaid GST, interest, and penalties because a split decision creates no legal protection.
The terms explained
- commission agent
- A person who buys or sells goods on behalf of another person for a fee or percentage.
- reverse charge mechanism
- A situation where the buyer pays GST directly to the government instead of paying it to the seller.
- advance ruling
- An official decision by tax authorities answering a specific business's question about how GST applies to them.
- appellate authority for advance ruling
- A higher tax body that decides appeals or resolves split decisions from the advance ruling authority.
The ruling in detail
Authority for Advance Ruling
M/s JAYALAKSHMI TOBACCO COMPANY
Order No. 03 /AAR/AP/GST/2018 dated 08.06.2018 · Andhra Pradesh
Questions before the authority
- Will GST be applicable on sale of tobacco leaves received from farmers made by Commission Agent in an auction and his turnover is less than Rs.20 Lakh?
- In case, there is GST in the above situation, who has to pay the tax?
- Will reverse charge provisions applicable for tobacco leaves or not?
- Who has to pay GST when commission agent sell the tobacco leaves received from trader in an auction? Can commission agent collect GST from buyers and pay or not?
- The Commission Agent receives tobacco from farmers and sell them within the state. He takes commission from farmers for his services and it is less than Rs. 20 Lakh in a year. Will the Commission Agent is liable to collect GST in this situation?
Facts
The applicant is a commission agent dealing with tobacco leaves, procuring them from farmers as well as traders to sell in auctions. The applicant receives commission for its services and sought an advance ruling on GST applicability, reverse charge applicability, tax payment liability, and registration requirements.
Ruling
The two-member Authority expressed **different views** on the questions raised and found no consensus to pronounce a ruling. Consequently, as per Section 98(5) of the CGST/APGST Act, 2017, the application was treated as **ruling not issued** and referred to the Appellate Authority for Advance Ruling for further action.
Reasoning
The State Tax Member held that sales on behalf of traders require mandatory registration under Section 24 and attract GST, while commission received from farmers is exempt if turnover thresholds are met. Conversely, the Central Tax Member viewed services by commission agents for sale or purchase of agricultural produce (tobacco leaves) as fully exempt with NIL rate under Sl. No. 24 of Notification No. 11/2017-Central Tax (Rate). Due to this irreconcilable difference of opinion between the members, no consensus could be reached under Section 98(5) of the CGST/APGST Act, 2017, requiring referral to the Appellate Authority.
Provisions relied on
- Section 98(5) of CGST / APGST Act, 2017
- Section 2(5) of CGST Act, 2017
- Section 2(6) of CGST Act, 2017
- Section 7(1) of CGST Act, 2017
- Section 15 of CGST Act, 2017
- Section 23 of CGST Act, 2017
- Section 24 of CGST Act, 2017
- Schedule I of CGST Act, 2017
- Notification No. 04/2017-Central Tax (Rate) dated 28.06.2017
- Notification No. 11/2017-Central Tax (Rate) dated 28.06.2017
For the practitioner
This order highlights the procedural outcome when AAR members disagree, resulting in **no ruling being issued** and an automatic referral to the Appellate Authority for Advance Ruling under Section 98(5). Practitioners cannot rely on individual member findings attached to a split decision as binding precedent. The substantive taxability of tobacco commission agents remained unresolved at this forum level.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/AAR/ap_03-2018_08.06.18_jayalakshmi_tobacco_co.pdf
Legibility of the scan, as read: high.
Prepared 19-10-2026.
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