Plastic and paper carrying bags are classified by material

Plastic and paper carrying bags are classified by material under Chapters 39 and 48, with a conditional 5% rate for biodegradable variants.

Issue

Whether carrying bags, including compostable or biodegradable variants, are classifiable under Heading 3923 or Chapter 48 based on their constituent material under Notification No. 9/2025-Central Tax (Rate).
Whether the Authority for Advance Ruling (AAR) has the jurisdiction to scientifically determine the biodegradability of bags to grant the conditional concessional rate of 5% under Entry 319 of Schedule I.

Facts

The Business: The applicant is a proprietorship concern engaged in the manufacture and sale of carrying bags, including compostable and biodegradable variants.
The Prior Classification: Prior to September 22, 2025, these carrying bags were being classified under HSN 3923 29 90, attracting an 18% GST rate.
The Relief Sought: The applicant approached the AAR seeking the correct HSN classification based on constituent materials and requested the application of a concessional 5% GST rate under Entry 319 of Schedule I to Notification No. 9/2025-Central Tax (Rate).
Evidence Submitted: To support the claim for the 5% concessional rate for biodegradable bags, the applicant submitted a certificate from a notified agency and a technical report from the Central Institute of Petrochemicals Engineering & Technology (CIPET).

Decision

Material-Based Classification: The Authority held that the tariff classification depends strictly on the constituent material used. Bags made from polymers or compostable plastics fall under Heading 3923 (Chapter 39) as articles for conveyance or packing, while bags made from paper fall under Chapter 48.
Environmental Irrelevance for HSN: The environmental attributes—such as whether a plastic bag is biodegradable or compostable—do not alter its fundamental HSN classification under Chapter 39.
Jurisdictional Boundaries: The AAR ruled that its statutory jurisdiction under Section 97(2) is strictly confined to interpreting tax classification and rate notifications. It does not possess the power to make scientific or environmental determinations regarding biodegradability, rendering the agency certificates outside its scope of review.
Conditional Concessional Rate: The 5% rate under Entry 319 is entirely conditional. If the supplied bags are factually biodegradable, the 5% concessional rate applies; if they fail to meet that threshold, the standard, higher rate applicable to plastic bags under Chapter 39 is leviable.

Key Takeaways

Constituent Material Governs HSN: For packaging materials and carrying bags, tax classification is blind to eco-friendly labels. A plastic bag remains classified under Chapter 39 regardless of whether it is conventional, compostable, or biodegradable.
AAR Cannot Certify Scientific Facts: Tax authorities will not cross into the domain of scientific laboratories. An advance ruling authority will interpret the tax rate applicable to a specific category of goods, but the factual burden of proving a scientific trait (like biodegradability) remains an enforcement and evidentiary matter.
Strict Construction of Concessional Entries: When a notification provides a lower tax rate conditional upon an environmental characteristic, the taxpayer must fulfill that condition factually at the time of supply to legally claim the benefit.

AUTHORITY FOR ADVANCE RULING , RAJASTHAN

Sunita Kohli, In re

Utkarsha, Member (Central Tax)
and Dr. Akhedan Charan, Member (State Tax)

ADVANCE RULING NO. RAJ/AAR/2025-26/24

MARCH 27, 2026

Vinod Kumar and Girish Kohli, CAs for the Applicant.

proceedings

The issue raised by M/s SUNITA KOHLI, F-274, INDUSTRIAL PLOT, CHOPANKI, BHIWADI-301019, ALWAR, Rajasthan (hereinafter “the applicant”) is fit to pronounce advance ruling as they have deposited prescribed Fee under CGST Act and it falls under the ambit of the Section 97(2) given as under:

(a) classification of goods and/or services or both

A. SUBMISSION OF THE APPLICANT (in brief)

Brief facts of the case:

(a)

We M/s SKP Enterprises, a proprietorship concern in the name of Mrs Sunita Kohl having GST number and address mentioned above, are into manufacturing and selling of packing material i.e. carrying bag of various types. Out of them one major portion pertains to Compostable bags (i.e. bio-degradable bags). The HSN Code of the above items has been HSN: 3923 29 90, Chapter: 39 – Plastics and articles thereof, Description: Other sacks and bags, of plastics. Earlier prior to 22.09.2025, the above item was classified as above are GST rate was charged at GST @ 18% (9% CGST + 9% SGST). Copy of Certificate to manufacture and sell compostable bags by CPCB, Copy of LAB testing report CIPET and Copy of Sample Sales Invoices as evidence that we are into manufacturing of such product and the products are biodegradable/ compostable.

(b)

In pursuance of notification No. 9/2025-Central Tax (Rate), dated 17-Sep-2025, effective 22-Sep-2025, “Paper Sacks/Bags and bio-degradable bags” are specified against Chapters 39, 48 in Schedule I (CGST 2.5%), yielding 5% GST.

(c)

Given the specific wording “Paper sacks/Bags and bio-degradable bags” mapped to chapters 39 & 48 in Schedule I, the applicant submits that biodegradable bags-whether of plastic origin (ch.39) or paper origin (Ch.48) – are specifically covered at 5% GST from 22-Sep-2025.

The specific entry should prevail over general residual/generic entries for 3923 or paper articles placed in higher schedules.

The exact 8 digit HSN may be determined based on material composition, size, and use, but the rate remains 5% by virtue of the specific notification entry.

(d)

Presently, similar non-biodegradable/compostable plastic bags are generally classified under HSN 39232990 (Articles for the conveyance or packing of goods, of plastics).

(e)

Pursuant to Notification No. 9/2025-Central Tax (Rate), dated 17-Sep-2025, effective 22-Sep-2025, “Paper Sacks/Bags and bio-degradable bags” are specified against Chapters 39, 48 in Schedule I (CGST 2.5%), yielding 5% GST, copy enclose.

(f)

The Applicant’s products are biodegradable as per (standards/certifications-attach test reports) and are supplied as (pre-packaged & labelled / bulk) packs. We seek clarification on the following two question mentioned below.

It clearly covers both required aspects:

1. Classification – under which HSN Code? and

2. Applicable GST Rate – Under Notification No. 09/2025-Central Tax (Rate), dated 17 Sept 2025, entry 319 of schedule I (5% rate).

B. INTERPRETATION AND UNDERSTANDING OF APPLICANT ON QUESTION RAISED (IN BRIEF)

1. Specific Notification Entry Covers the Product

That vide Notification No. 9/2025-Central Tax (Rate), dated 17.09.2025, effective from 22.09.2025, the Government has specifically inserted an entry in Schedule I (5% rate) covering “Paper Sacks/Bags and bio-degradable bags/Compostable Bags” against Chapters 39 and 48. Accordingly, all biodegradable bags-irrespective of their base composition-are squarely covered under this specific concessional entry.

2. Principle of Specific Entry Prevailing Over General Entry

As per settled classification principles and CBIC circular, a specific entry always overrides a general or residual entry. Hence, once biodegradable bags are specifically covered under the said notification, classification under any residual heading attracting a higher rate (such as 3923 29 90 or similar) does not apply.

3. Definition and Compliance with Biodegradable /Compostable Standards

The applicant manufactures bags using biodegradable / compostable polymers conforming to IS/ISO 17088 standards, duly supported by test certificates. Therefore, these bags are environment-friendly substitutes for plastic carry bags, fully aligned with the intent of Government policy to promote biodegradable packing materials. We have obtained a certificate from CIPET (Centre for Skilling and Technical Support – CSTS), Department of chemicals and Petrochemicals, Ministry of Chemicals and Fertilizers, Government of India.

4. Legislative Intent and Environmental Objective

The concessional rate aims to incentive biodegradable alternatives and reduce single-use plastic pollution. The applicant’s product directly supports this objective and must therefore receive the concessional rate benefit.

5. No Contradiction or Overlap with Other Entries

The entry for biodegradable bags / Compostable Bags stands independently and is not restricted by material composition. The heading linkage to both Chapters 39 and 48 demonstrates the Legislature’s intent to cover biodegradable variants made from plastic, compostable polymer, or paper base.

6. Uniform Rate Applicability

The rate of 5% (2.5% SGST) applies uniformly from 22.009.2025 onwards to all biodegradable bags, whether supplied in bulk or pre-packages, as per the specific notification.

C. QUESTIONS ON WHICH THE ADVANCE RULING IS SOUGHT:

1. Classification/HSN: Whether the Applicant’s biodegradable bags are classifiable under Chapter 39 (if of plastic/compostable polymer) or Chapter 48 (if of paper), and the appropriate HSN therein.

2. Rate of tax & applicability of notification: Whether supplies of the said biodegradable bags are covered by the entry “Paper Sacks/Bags and bio-degradable bags” (Ch. 39, 48) in Schedule I of Notification 9/2025-CTR, attracting 5% GST (2.5% CGST + 2.5% SGST), w.e.f. 22-Sep-2025.

D. COMMENTS OF THE JURISDICTIONAL OFFICER:-

Comments sought from the Office of Assistant Commissioner, CGST Division-TIJAZRA, ALWAR, Rajasthan vide letter No. F.05/COMM/AAR State/2025-26/249 Dated 26-02-2025 has not received yet so no information for field formation.

E. PERSONAL HEARING:

In the matter, personal hearing was granted to the applicant on 09.03.2026. Mr. Vinod Kumar (C.A.), Mr. Girish Kohli (C.A.) Authorized Representative appeared for personal hearing. They reiterated the submission already made by them.

F. DISCUSSIONS AND FINDINGS

1. We have carefully examined the statement of facts, the application filed by the applicant, the submissions made during the hearing, and the comments from the jurisdictional Tax Authority. We also considered the issues involved for which the advance ruling is sought, along with other relevant facts.

2. The applicant M/s SKP Enterprises, a proprietorship concern in the name of Mrs. Sunita Kohli, F-274, INDUSTRIAL PLOT, CHOPANKI, BHIWADI-301019, ALWAR, Rajasthan, and is registered with the GST department having GSTIN 08AKUPK9470G1ZG. The applicant is engaged in the manufacturing and selling of packing material i.e. carrying bag of various types.

3. The issue raised by the applicant is fit to pronounce advance ruling as they have deposited prescribed fee under CGST Act and it falls under the ambit of the Section 97(2) given as under:

(a)

classification of goods and/or services or both, and

(b)

Applicability of a notification issued under the provisions of this Act.

4. We find that the applicant has submitted certificates issued by a notified agency indicating that the product is “bio-degradable/compostable”. However, the mere submission of such a certificate does not authorize this Authority to make any scientific, technical or environmental determination regarding the actual biodegradability or compostability of the product.

5. This Authority is constituted to decide matters falling within the scope of Section 97(2) of the CGST Act, namely classification of goods, applicability of notifications, admissibility of input tax credit, liability to pay tax, requirement for registration, and whether an activity amounts to supply. We do not possess the jurisdiction to determine whether a product meets environmental, technical or scientific standards of biodegradability or compostability.

6. The determination of biodegradability or compostability is a scientific and technical matter falling within the jurisdiction of the environmental authorities and not within the scope of this Authority under Section 97(2) of the CGST Act.

7. We find that the bags in question, if made from polymer or compostable plastics, are classifiable under Chapter 39 – Plastics and articles thereof, specifically under heading 3923, being articles for the conveyance or packing of goods. Furthermore, if the bags are manufactured from paper, they are classifiable under Chapter 48 – Paper and paperboard; articles of paper pulp, of paper or of paperboard. This classification is independent of whether the material is biodegradable or not.

8. We further observe that Entry No. 319 of Schedule I to Notification No. 9/2025-Central Tax (Rate) dated 17.09.2025 provides a concessional GST rate of 5% for “Paper Sacks/Bags and bio-degradable bags” under Chapters 39 and 48. The concessional rate is therefore conditional in nature and applies only if the goods supplied are biodegradable as understood in the context of the said entry.

9. Accordingly, while we cannot determine whether the applicant’s product is biodegradable or compostable, we hold that if the bags supplied by the applicant are biodegradable, then the benefit of Entry No. 319 of Schedule I would be available and GST would be payable at the rate of 5% (2.5% CGST + 2.5% SGST). If the product is not biodegradable, then the concessional rate would not apply, and the applicable rate under the general classification for plastic bags under Chapter 39 would apply.

In view of the foregoing facts, circumstances and provisions of the GST law, we pass the following ruling:

RULING

Q 1) Classification/HSN: Whether the Applicant’s biodegradable bags are classifiable under Chapter 39 (if of plastic/compostable polymer) or Chapter 48 (if of paper), and the appropriate HSN therein.

Ans 1-As discussed in Para 7 above.

Q 2) Rate of tax & applicability of notification: Whether supplies of the said biodegradable bags are covered by the entry “Paper Sacks/Bags and bio-degradable bags” (Ch. 39, 48) in Schedule I of Notification 9/2025-CTR, attracting 5% GST (2.5% CGST + 2.5% SGST), w.e.f. 22-Sep-2025.

Ans 2- As discussed in Para 9 above.