Classification of Non Woven Bags: GST Rates and Exemption Eligibility

The Authority determined that Non Woven Bags made from Fiber grade polypropylene granules are classified under Heading No. 3923, as they are considered plastic materials. The applicable GST rates for these bags are 18% from 01.07.2017 to 30.09.2019 and from 01.01.2020 onwards, and 12% from 01.10.2019 to 31.12.2019. Additionally, Non Woven Bags are not eligible for exemption under Notification No. 01/2017-CT (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. 01/2017-CT (Rate) and 01/2017-I.T. (Rate).

Issue-wise Analysis:

1. Classification of Non Woven Bags under GST:

The applicant, engaged in manufacturing Non Woven Bags from Polypropylene Non Woven Fabrics, sought clarification on whether these bags should be classified under Heading No. 6305 or 3923.

The applicant argued that:
- Polypropylene Non Woven Bags are manufactured from Non Woven fabrics classifiable under Heading No. 5603, thus should be considered textile articles and classified under Heading No. 6305.
- The Appellate Authority for Advance Ruling had previously settled that Polypropylene Non Woven Bags should be classified under Heading No. 6305.
- The Director of DKTE Center of Excellence in Non Wovens confirmed that Polypropylene Non Woven Fabric is a textile material, not plastic.

Upon review, the Authority noted:
- The manufacturing process involves polypropylene granules forming Non Woven Fabrics, which are then used to make Non Woven Bags.
- Chapter 39 covers plastics and articles thereof, explicitly excluding materials regarded as textiles of Section XI.
- The Hon’ble High Court of Madhya Pradesh in M/s. Raj Packwell Ltd. v. UOI classified HDPE woven bags as plastic articles under Heading 3923.
- The Supreme Court in M/s. Porrits and Spencers (Asia) Limited v. State of Haryana defined textiles as woven fabrics from yarns like cotton, silk, rayon, or nylon, not including plastic materials.

The Authority concluded that Non Woven Bags made from Fiber grade polypropylene granules are plastic materials, thus classifiable under Heading 3923.

2. Eligibility for Exemption under Notification No. 01/2017-CT (Rate) and 01/2017-I.T. (Rate):

The applicant sought to know if Non Woven Bags would be eligible for exemption under the specified notifications.

The Authority clarified:
- The GST rates for goods under Heading 3923 varied over time:
- From 01.07.2017 to 30.09.2019: 18% GST (CGST @ 9% + SGST @ 9%).
- From 01.10.2019 to 31.12.2019: 12% GST (CGST @ 6% + SGST @ 6%).
- From 01.01.2020 onwards: 18% GST (CGST @ 9% + SGST @ 9%).
- The CBIC Circular No. 80/54/2018-GST clarified that Polypropylene Woven and Non-Woven Bags are classifiable under HS code 3923 and attract 18% GST.

Thus, the Authority ruled that Non Woven Bags are not eligible for exemption under the mentioned notifications.

Ruling:
1. Non Woven Bags manufactured from Non Woven plastic material made from Fiber grade polypropylene granules are classified under Heading No. 3923.
2. The applicable GST rates are:
- 01.07.2017 to 30.09.2019: 18%
- 01.10.2019 to 31.12.2019: 12%
- 01.01.2020 onwards: 18%
3. Non Woven Bags are not eligible for exemption under Notification No. 01/2017-CT (Rate) and 01/2017-I.T. (Rate).

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