2026-VIL-196-AAR
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SGST Advance Ruling Authority

GST - Classification of biodegradable carry bags - Chapter 39 of the Customs Tariff - Applicant manufactured Bio Carry Bags from compostable polymers or biodegradable plastic substitutes. The Applicant claimed that the bags were made in compliance with the standard for compostable plastics. It also relied on certificates and a test report - Whether the bags are classifiable under Chapter 39 as plastic articles or under Chapter 48 as paper-based bags - HELD - The primary raw materials of the bags are compostable polymers or biodegradable plastic substitutes, which are plastic materials. The bags should therefore be covered under Chapter 39 which covers plastics and articles thereof. Articles of compostable polymers or biodegradable plastic substitutes are not covered under any of the headings 3901 to 3925. They fall under the residual heading 3926 covering other articles of plastics. There is no specific entry for such bags in the sub-headings of heading 3926 - The bags are classifiable under sub-heading 39269099 – Ordered accordingly - Applicability of Serial No. 319 of Schedule I to Notification No. 09/2025-Central Tax (Rate) - Paper sacks and bags and biodegradable bags - Applicant claimed that the bags are covered by the entry for paper sacks, bags and biodegradable bags. Heading 3926 is otherwise covered by Serial No. 127 of Schedule II - Whether the bags are covered by Serial No. 319 of Schedule I attracting GST at 5% - HELD - Serial No. 319 is a newly inserted entry. The minutes of the 54th meeting of the GST Council show that the discussion concerned paper sacks and bags, with a request to include biodegradable bags made from starch which resemble plastic. The entry therefore covers both paper sacks and bags as well as biodegradable bags. Its purpose is to promote eco-friendly products. Chapter 39 is included in the entry to encourage production of plastic bags which are biodegradable in nature - The Interim Report indicates that the sample conforms to the standard for compostable plastics in the disintegration and biodegradation tests. However, the report is issued in the name of a sister concern which supplies the raw material. Further tests were still in progress, and the report is valid only till the issuance of the final Test Report. Since Serial No. 319 applies, there is no need to discuss Serial No. 127 of Schedule II - The bags are covered by Serial No. 319 of Schedule I and are liable to GST at the rate of 5%. The ruling is strictly subject to the validity of the Applicant's claim that the bags are biodegradable.
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