2026-VIL-198-AAR
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SGST Advance Ruling Authority

GST - Classification of Kraft paper bags - Chapter Sub-Heading 4819 of the Customs Tariff - Applicant manufactured Kraft paper bags by using Kraft paper 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 by small traders - Whether the Kraft paper bags are classifiable under tariff item 4819 3000 or under any other entry of Sub-Heading 4819 - HELD - Sub-Heading 4819 covers cartons, boxes, cases, bags and other packing containers of paper, and the impugned bags being paper bags are covered by it. The bags are made of Kraft paper, are unbranded and without handles, and 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-CT (Rate) - Paper sacks and bags - Applicant claimed that the bags, being eco-friendly and compostable, should attract the concessional rate under Serial No. 319 of Schedule I and not the rate under Serial No. 185 of Schedule II - Whether the Kraft 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 tariff item 4819 4000. The bags are therefore not exempt from GST. Two competing entries are found for the paper bags, one under Serial No. 319 of Schedule I and the other under Serial No. 185 of Schedule II. Serial No. 319 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. On a plain reading, paper bags manufactured using Kraft paper and adhesive glue are squarely covered by Serial No. 319 of Schedule I - 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 - Applicant manufactured Kraft 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. Since the bags are taxable at 5%, the Applicant is eligible to avail ITC 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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