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CBIC clarification on classification and taxation of 'Rab'.

Rab - A semi-solid or semi-liquid state of sugarcane juice has been a matter of dispute for long as to it's correct classification and taxation.

CBIC has issued a clarification on classification and taxation of 'Rab'. Before understanding this clarification, you need to understand its background.

What is Rab?

‘Rab’ is a semi-solid / semi-liquid state of sugarcane juice. It occurs midway during the process of dehydrating the sugarcane juice and converting it into jaggery. The process for obtaining ‘Rab’ starts from the extraction of the cane juice from the Sugar Cane which is sent further for sulphation to remove the impurities. After the removal of impurities, the cane juice is heated up to 100^oC, and the impurities are allowed to settle leaving a clear juice on top. This clear juice is later concentrated into ‘Rab’. It is essential that the juice remains in a semi-solid state.

What was the confusion?

Prior to the clarifications issued by the Government, there was a confusion regarding the correct classification of ‘Rab’ and applicable rate of tax thereon.

The industry generally classified the ‘Rab’ under the different HSN viz. 1701, 1702 or 1703. It was thus not clear whether ‘Rab’ is subject to GST @ 28% or 18% or 5% or Nil. 

Circular No. 189/01/2023 dated 13.01.2023:

CBIC vide Circular No. 189/01/2023-GST dated 13 January 2023 had issued clarification that Rab is appropriately classificable under HSN 1702 attracting GST rate of 18%.

Representation has been received seeking clarification regarding the classification of "Rab". It has been stated that under the U.P. Rab (Movement Control Order), 1967, "Rab" means ‘massecuite prepared by concentrating sugarcane juice on open pan furnaces, and includes Rab Galawat and Rab Salawat, but does not include khandsari molasses or lauta gur.’ Although, a product of sugarcane, Rab exists in semi-solid/liquid form, and is thus not covered under heading 1701. The Hon’ble Supreme Court in its order in Krishi Utpadan Mandi Samiti vs. M/s Shankar Industries and others [1993 SCR (1)1037] has distinguished Rab from Molasses. Thus, Rab being distinguishable from molasses is not classifiable under heading 1703.

Accordingly, it is hereby clarified that Rab is appropriately classifiable under heading 1702 attracting GST rate of 18% (S. No. 11 in Schedule III of notification No. 1/2017-Central Tax (Rate), dated the 28th June, 2017).

49th GST Council Meeting dated 18.02.2023 & GST Circular No.191/03/2023 dated 27.03.2023:

The Circular read as under:

Based on the recommendation of the GST council in its 49th meeting, held on 18th February, 2023, with effect from the 1st March, 2023, 5% GST rate has been notified on Rab, when sold in pre- packaged and labelled, and Nil GST, when sold in other than pre- packaged and labelled.

Further, as per the recommendation of the GST Council in the above-said meeting, in view of the prevailing divergent interpretations and genuine doubts regarding the applicability of GST rate on Rab, the issue for past period is hereby regularized on “as is” basis. 

That means, the taxpayers who were classifying ‘Rab’ under HSN 1701 and claiming exemption under entry 94 of Notification No. 2/2017-Central Tax (Rate) or discharging GST at 5% under Entry No. 91 of Schedule-I to Notification No.1/2017 - Central Tax (Rate) may not be required to pay any differential tax. 

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