2026-VIL-192-AAR
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SGST Advance Ruling Authority

GST - Classification of paper bags - Chapter Sub-Heading 4819 of the Customs Tariff - Applicant manufactured Kraft paper bags, Greaseproof paper bags and Glassine paper bags by using the respective papers and adhesive glue. The bags were plain or printed, uncoated, without lamination or plastic content, unbranded and without handles. They were supplied for packaging in pharmaceutical stores, grocery shops and sweet shops - Whether the paper bags are classifiable under tariff item 4819 3000 or under any other entry of Sub-Heading 4819 - HELD - Kraft paper, greaseproof paper and glassine paper are made out of natural plant fibres, which establishes that the bags are goods made out of paper. Sub-Heading 4819 covers cartons, boxes, cases, bags and other packing containers of paper. The bags are unbranded and without handles, and they do not have the base width prescribed for tariff item 4819 3000. Correlating these characteristics with the HSN notes to Sub-Heading 4819, the bags find a specific entry under tariff item 4819 4000 covering other sacks and bags, including cones - The bags are classified under HSN 48194000 – Ordered accordingly - Exemption from tax and applicability of Serial No. 319 of Schedule I to Notification No. 9/2025-Central Tax (Rate) - Paper sacks and bags - Applicant claimed that the paper bags, being eco-friendly and biodegradable, are eligible for the concessional rate notified for paper sacks, bags and biodegradable bags - Whether the paper bags are exempt from GST or are covered by Serial No. 319 of Schedule I, and the rate of tax applicable - HELD - The exemption notification for intra-State supplies of goods does not contain an entry for the impugned bags classified under tariff item 4819 4000. The bags are therefore not exempt from GST. Serial No. 319 of Schedule I covers paper sacks and bags and biodegradable bags falling under Chapters 39 and 48, and it takes into account the taxability of both. The reduced rate reflects the Government's push towards eco-friendly alternatives to plastics. Paper made from natural plant fibres biodegrades through the action of microorganisms without leaving toxic microplastics in the environment. Bags manufactured using Kraft, Greaseproof or Glassine paper and adhesive glue qualify as paper bags under Serial No. 319 - The bags are not exempt from GST. They attract GST at the rate of 5% under Serial No. 319 of Schedule I - Eligibility to Input Tax Credit - Section 16 of the CGST Act, 2017 - Applicant manufactured paper bags taxable at the concessional rate - Whether the Applicant is eligible to avail Input Tax Credit on the inputs and input services used in the manufacture of the bags - HELD - The eligibility and conditions for availing Input Tax Credit are specified under Section 16 of the CGST Act and the TNGST Act. Since the bags are taxable at 5%, the Applicant is eligible to avail Input Tax Credit on the inputs and input services used in the manufacture of the outward supply, subject to satisfying all the conditions prescribed under Section 16 - The Applicant is eligible to avail Input Tax Credit subject to Section 16 conditions.
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