Classification of Non-Woven Bags for GST: Ruling on Applicable Rates and Exemption

The Non-Woven Bags manufactured from polypropylene granules were classified under Heading No. 3923 instead of Heading No. 6305. The Authority ruled that these bags do not qualify for exemption under Notification No. 01/2017-CT (Rate) due to the applicable GST rates. The GST rates applicable were 18% from 01.07.2017 to 30.09.2019, 12% from 01.10.2019 to 31.12.2019, and back to 18% from 01.01.2020 onwards.

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Issues Involved:
1. Classification of Non-Woven Bags under the appropriate Heading.
2. Eligibility for exemption under Notification No. 01/2017-CT (Rate).

Issue 1: Classification of Non-Woven Bags

The main issue is whether Non-Woven Bags manufactured through the intermediate product Non-Woven fabric, classifiable under Heading No. 5603, should be classified under Heading No. 6305 or Heading No. 3923.

The applicant argued that their product should be classified under Heading No. 6305, citing previous classifications and rulings, including the decision by the Appellate Authority for Advance Ruling and clarification from the DKTE Center of Excellence in Non-Wovens. They also referenced the Supreme Court decision in the case of Porritts and Spencers (Asia) Limited v/s State of Haryana, which defined "textile" broadly.

Upon review, the Authority noted that the manufacturing process involves polypropylene granules, which are melted and spun into filaments to create Non-Woven fabrics. These fabrics are then used to make Non-Woven bags. The Authority examined the relevant headings and HSN Explanatory Notes for both Heading No. 6305 and Heading No. 3923.

Heading No. 6305 covers "Sacks and Bags, of a kind used for the packing of goods," primarily focusing on textile materials. However, the Authority concluded that the applicant's product, made from polypropylene granules, falls under the definition of plastic materials. The Authority cited the Madhya Pradesh High Court's decision in the case of M/s. Raj Packwell Ltd. v. UOI, which held that HDPE woven bags are classified as articles of plastic.

The Authority further referenced CBIC (TRU) 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. Consequently, the Authority ruled that Non-Woven Bags manufactured from polypropylene granules are classifiable under Heading No. 3923.

Issue 2: Eligibility for Exemption

The second issue was whether Non-Woven Bags are eligible for exemption under Notification No. 01/2017-CT (Rate).

The Authority examined the applicable GST rates and amendments to the notification over time. Initially, goods under Heading No. 3923 were subject to an 18% GST rate. From 01.10.2019 to 31.12.2019, the rate was reduced to 12%. However, effective from 01.01.2020, the rate reverted to 18%.

Based on the classification under Heading No. 3923 and the applicable GST rates, the Authority concluded that Non-Woven Bags are not eligible for exemption under Notification No. 01/2017-CT (Rate).

Ruling:
1. The product Non-Woven Bags manufactured through the intermediate product Non-Woven fabric classifiable under Heading No. 5603 is properly classifiable under Heading No. 3923. The applicable GST rates during different periods are:
- 01.07.2017 to 30.09.2019: 18% (9% CGST + 9% SGST)
- 01.10.2019 to 31.12.2019: 12% (6% CGST + 6% SGST)
- 01.01.2020 to till date: 18% (9% CGST + 9% SGST)

2. The product Non-Woven Bags is not eligible for exemption under Notification No. 01/2017-CT (Rate) as amended.

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