Classification of Non-Woven Bags for GST: Ruling on HS Code 3923 and Exemption Eligibility

The Authority ruled that Non-Woven Bags made from Fiber grade poly propylene granules are classified under HS code 3923 and attract 18% GST. Additionally, it was concluded that Non-Woven Bags are not eligible for exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate).

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Issues Involved:
1. Classification of Non-Woven Bags under GST.
2. Eligibility for exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate).

Detailed Analysis:

1. Classification of Non-Woven Bags under GST:
The primary issue is whether Non-Woven Bags manufactured through Non-Woven Fabrics are classifiable under Heading No. 6305 or 3923.

- Applicant's Argument: The applicant argued that Non-Woven Bags should be classified under Heading No. 6305, as they are manufactured from Non-Woven fabrics (classified under Heading No. 5603), which are textile materials. They relied on various rulings and clarifications, including the decision by the Appellate Authority for Advance Ruling (AAAR) in West Bengal and the Supreme Court's judgment in Porritts and Spencer (Asia) Ltd. v. State of Haryana.

- Authority's Analysis: The Authority examined the relevant chapter notes, headings, and HSN Explanatory Notes. The Authority noted that Chapter 39 covers plastics and articles thereof, and Chapter 63 covers textile articles. The Authority referred to the Madhya Pradesh High Court's decision in M/s. Raj Packwell Ltd. v. UOI, which held that HDPE bags are articles of plastic and not textile materials.

- Conclusion: The Authority concluded that Non-Woven Bags made from Fiber grade poly propylene granules are plastic materials and should be classified under HS code 3923. The Authority also referred to CBIC Circular No. 80/54/2018-GST, which clarified that Polypropylene Woven and Non-Woven Bags are classifiable under HS code 3923 and attract 18% GST.

2. Eligibility for Exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate):
The second issue is whether Non-Woven Bags are eligible for exemption under the specified notifications.

- Applicant's Argument: The applicant contended that if classified under Heading No. 6305, Non-Woven Bags would be eligible for exemption under the said notifications.

- Authority's Analysis: The Authority analyzed the applicable GST rates and amendments to the notifications. The Authority noted that from 01.07.2017 to 30.09.2019, the applicable GST rate for goods under Chapter 3923 was 18%. From 01.10.2019 to 30.12.2019, the rate was 12%, and from 01.01.2020 onwards, it reverted to 18%.

- Conclusion: The Authority concluded that Non-Woven Bags are not eligible for exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate).

Ruling:
1. Classification: Non-Woven Bags manufactured through Non-Woven Fabrics are classifiable under HS code 3923.
2. GST Rates:
- From 01.07.2017 to 30.09.2019: 18% (9% CGST + 9% SGST).
- From 01.10.2019 to 30.12.2019: 12% (6% CGST + 6% SGST).
- From 01.01.2020 onwards: 18% (9% CGST + 9% SGST).
3. Exemption: Non-Woven Bags are not eligible for exemption under Notification No.1/2017-C.T. (Rate) and 01/2017-I.T. (Rate).

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