2026-VIL-201-AAR
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SGST Advance Ruling Authority

GST - Gujarat AAR - Classification of Biodegradable and Compostable Bags - Heading 3926 of Customs Tariff Act, 1975 - Applicant manufactured biodegradable and compostable packing bags from bio-based/biodegradable polymer resins such as PBAT, starch and calcium carbonate. Applicant claimed classification under sub-heading 39079990 - Whether the biodegradable and compostable packing bags are classifiable under HSN 39079990 - HELD - Polybutylene Terephthalate and polylactic acid find mention under Tariff Heading 3907 whereas starch-based polymers and compostable bioplastics do not find mention in any heading of Chapter 39. Since the product is biodegradable and compostable bags, it cannot be covered under Tariff Heading 3907. Headings 3901 to 3914 cover plastic raw materials in primary form, and the bags do not find mention in headings 3915 to 3925. Heading 3926 covers other articles of plastics, and there is no mention of Biodegradable and Compostable Bags in any of its sub-headings. The product is therefore aptly classifiable under sub-heading 39269099 and not under sub-heading 39079990 as opined by the Applicant - The bags are held classifiable under HSN 39269099 of the First Schedule to the Customs Tariff Act, 1975 - Ordered accordingly - Rate of GST on Biodegradable Bags - Entry No. 319 of Schedule-I of Notification No. 09/2025-Central Tax (Rate) - Bags classifiable under sub-heading 39269099 could fall under Entry No. 127 of Schedule-II, which covers heading 3926, or under Entry No. 319 of Schedule-I, which covers paper sacks/bags and bio-degradable bags of Chapters 39 and 48. The Applicant submitted consent orders of the Pollution Control Board, a certificate of an international certification body and a test report on the compostable film in support of the claim that the bags are biodegradable and compostable - Whether the bags attract GST under Entry No. 319 of Schedule-I or under Entry No. 127 of Schedule-II - HELD - Entry No. 319 was newly inserted in Schedule-I and was not part of the earlier Notification No. 01/2017-Central Tax (Rate). The minutes of the 54th meeting of the GST Council show that States urged a reduced rate to promote paper bags and biodegradable bags made from starch as eco-friendly alternatives to plastic bags. The entry therefore takes into consideration the taxability of both paper sacks/bags and biodegradable bags. The inclusion of Chapter 39 in the entry is to encourage production of plastic bags which are biodegradable in nature, eco-friendly and environmental friendly. The test report on the sample shows disintegration, seed germination and biomass levels in line with the composting standard. Since the applicable entry is decided, there is no need to discuss Entry No. 127 of Schedule-II - The bags are covered under Entry No. 319 of Schedule-I and are liable to GST at 5%, strictly subject to the validity of the Applicant's claim that the product is biodegradable.
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