Classification of Non-woven PP Rice Bags under HSN Code 63053300 and Changing Tax Rates

The Authority for Advance Ruling determined that "Non-woven PP Rice Bags / Sacks" are classified under HSN code 63053300. The applicable tax rate for these bags was initially 5% (2.5% CGST and 2.5% SGST) for bags valued below Rs. 1,000 per piece. However, the tax rate was subsequently amended to 12% (6% CGST and 6% SGST) effective from 30.09.2019 and further revised to 18% (9% CGST and 9% SGST) from 01.01.2020 onwards.

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Issues Involved:
1. Classification of "Non-woven PP Rice Bags / Sacks" under HSN code.
2. Applicable rate of tax for "Non-woven PP Rice Bags / Sacks".

Issue-wise Detailed Analysis:

1. Classification of "Non-woven PP Rice Bags / Sacks" under HSN code:

The applicant, a manufacturer of sacks and bags made from non-woven polypropylene fabric, sought clarification on the classification of their product under the Harmonized System of Nomenclature (HSN). They claimed that their product, "Non-woven PP Rice Bags / Sacks," should fall under HSN code 63053300.

The applicant detailed the manufacturing process, which involves purchasing non-woven fabric rolls classified under HSN code 5603, cutting them into sheets, printing designs, and stitching them into bags. These bags are primarily used for packing rice and other food products.

The jurisdictional Central Tax Officer supported the applicant’s claim by referencing a similar case where non-woven fabric bags were classified under HSN 63053300.

The Authority for Advance Ruling (AAR) examined the relevant HSN codes and explanatory notes. They identified that non-woven fabrics fall under CTH 5603, and sacks and bags of a kind used for packing goods fall under HSN 6305. The AAR concluded that the product in question, being non-woven fabric bags used for packing rice, is correctly classified under HSN 63053300.

2. Applicable rate of tax for "Non-woven PP Rice Bags / Sacks":

The applicant argued that the applicable tax rate for their product should be 5% (2.5% CGST and 2.5% SGST) if the sale value does not exceed Rs. 1,000 per piece, based on S.No. 224 of Schedule I of Notification No. 1/2017-C.T.(Rate) dated 28.06.2017.

The AAR reviewed the relevant notifications and amendments. Initially, the applicable rate of tax for non-woven fabric bags under HSN 63053300 was 5% (2.5% CGST and 2.5% SGST) for bags valued below Rs. 1,000 per piece, as per S.No. 224 of Schedule I of Notification No. 1/2017-C.T.(Rate) dated 28.06.2017.

However, effective from 30.09.2019, Notification No. 14/2019-C.T.(Rate) amended the tax rate to 12% (6% CGST and 6% SGST) for such bags, as per S.No. 80AA of Schedule II of Notification No. 1/2017-C.T.(Rate).

Further, effective from 01.01.2020, Notification No. 27/2019-C.T.(Rate) amended the tax rate to 18% (9% CGST and 9% SGST) for non-woven bags under HSN 63053300, as per S.No. 163B of Schedule III of Notification No. 1/2017-C.T.(Rate).

Ruling:

1. The Non-woven fabric bags called as ‘Rice Bag’ fall under HSN 63053300.
2. The applicable rate for the bag of value not exceeding Rs. 1,000 per piece is:
- 2.5% CGST and 2.5% SGST up to 30.09.2019, as per S.No. 224 of Schedule I of Notification No. 1/2017-C.T.(Rate).
- 6% CGST and 6% SGST from 30.09.2019 to 31.12.2019, as per S.No. 80AA of Schedule II of Notification No. 1/2017-C.T.(Rate).
- 9% CGST and 9% SGST effective from 01.01.2020, as per S.No. 163B of Schedule III of Notification No. 1/2017-C.T.(Rate).

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