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Issues: (i) Whether non-woven carry bags and cotton carry bags manufactured by the applicant are classifiable under heading 4202 or under heading 6305; (ii) What rate of GST applies to such bags before 15.11.2017 and from 15.11.2017 onwards.
Issue (i): Whether non-woven carry bags and cotton carry bags manufactured by the applicant are classifiable under heading 4202 or under heading 6305.
Analysis: The classification had to be determined on the basis of the First Schedule to the Customs Tariff Act and the relevant interpretative notes. Heading 6305 covers sacks and bags of a kind used for packing of goods, whereas the goods in question were found to be carry bags or shopping bags used by customers to take away purchases from shops. The materials and use showed that they were not packing bags for transport or storage of bulk goods. Heading 4202 specifically covers shopping bags and similar containers, including hand bags and shopping bags of textile materials, cotton and other materials. The factual description and samples supported classification as shopping bags rather than packing sacks.
Conclusion: The bags were correctly classifiable under CTH 4202 22 10 for non-woven carry bags and CTH 4202 22 20 for cotton carry bags.
Issue (ii): What rate of GST applies to such bags before 15.11.2017 and from 15.11.2017 onwards.
Analysis: The applicable rate followed the tariff entries in Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017 and the corresponding State notification. Before 15.11.2017, the relevant entries in Schedule III covered the goods at 9% each under CGST and SGST. By Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, cotton hand bags and shopping bags were shifted to Schedule II at 6%, while non-woven carry bags continued in Schedule III at 9%.
Conclusion: Up to 14.11.2017, both non-woven and cotton carry bags attracted 9% CGST and 9% SGST. From 15.11.2017 onwards, cotton carry bags attracted 6% CGST and 6% SGST, while non-woven carry bags continued to attract 9% CGST and 9% SGST.
Final Conclusion: The ruling determined the correct tariff classification and GST incidence for the applicant's bags in a manner adverse to the lower-rate claim for non-woven carry bags and favourable only to the extent of the reduced rate applicable to cotton carry bags after the amendment date.
Ratio Decidendi: Bags used as shopping or carry bags are classifiable under heading 4202 as shopping bags, and the applicable GST rate must be taken from the specific tariff entry as amended from time to time.
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