TaxTMI 
TaxTMI 
2026 (8) TMI 1677
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....of its Cattle Feed Plant at Malampuzha, Palakkad, which was established in 1972 by the Animal Husbandry Department, Government of Kerala and later transferred to KCMMF in 1983 under Operation Flood II. The plant is engaged in the production of cattle feed and nutritional supplements using modern computerized systems, with a capacity of up to 300 metric tons per day, supplying products such as Milma Gomathi, Gomathi Rich, Gomathi Gold, Bypro feeds, MilmaMin and Ksheerasamrudhi to dairy farmers across multiple districts through cooperative networks. 3.2 In the course of its manufacturing operations, the applicant procures raw materials such as maize, de-oiled rice bran, coconut cake, cotton seed and similar agricultural inputs. These materials, particularly maize, are received from suppliers in gunny bags (jute woven sacks without plastic coating), while other materials are received in polypropylene (PP) bags. After consumption of the raw materials in the manufacturing process, the empty bags remain as used packing material. 3.3 The used bags, which are no longer required for manufacturing purposes, are periodically disposed of through separate e-tender/auction processes conduc....
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.... 63051040, pertaining to jute sacks and bags used for packing goods. 4.3 As per Notification No. 1/2017-Central Tax (Rate) dated 28.06.2017, as amended from time to time, goods falling under Heading 6305 relating to jute sacks and bags used for packing agricultural produce attract GST at the rate of 5% (2.5% CGST + 2.5% SGST). 4.4 The applicant further references Explanatory Notes (2022) issued by the World Customs Organisation (WCO). 4.5 The applicant further submits that while used PP bags are treated and sold as scrap under HSN 391590 attracting GST at 18%, the used gunny bags without plastic coating are not sold as scrap but as reusable packing bags. Accordingly, it is their contention that such used gunny bags merit classification under HSN 6305 and should attract GST at 5%, and not be subjected to the higher rate applicable to scrap. 4.6 The applicant has also furnished photographic evidence (Figure 1) of the used gunny bags, showing that the bags are intact, bundled and capable of reuse as such. Further, a sample sale invoice (Figure 2) has been submitted wherein the goods are described as "old gunny bags" and supplied as identifiable packing material under HSN 6....
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....ction processes. The applicant has submitted that while used PP bags are treated and sold as scrap under HSN 391590 attracting GST at 18%, the used gunny bags without plastic coating are reusable in nature and are sold as such, and not as scrap. The applicant contends that such used gunny bags merit classification under HSN 6305 attracting GST at 5%. 7.3 The primary issue for consideration is whether the used gunny bags without plastic coating, arising after use in packing of raw materials and subsequently sold by the applicant, are to be classified as reusable packing bags under HSN 6305 or as waste/scrap under other headings, and the applicable rate of GST thereon. 7.4 In the present case, it is observed that the gunny bags in question were originally used for packing agricultural raw materials such as maize and whole cereals. Even after use, the applicant has demonstrated that such bags are reusable in nature, are sold in identifiable form as "old gunny bags", and are capable of being reused for the same purpose of packing agricultural produce. The goods are not sold in shredded or unusable condition, but retain their essential character as sacks and bags. 7.5 In this r....
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....of the goods at the time of supply remains that of packing bags, as they retain their form, structure and usability. 7.9 Furthermore, it is a settled principle of classification under the GST regime, aligned with the Customs Tariff, that goods are to be classified based on their essential character, condition at the time of supply, and intended use, and that classification must depend upon the commercial identity and use of the goods. In the present case, the used gunny bags retain their essential character as packing containers and continue to possess their original identity and utility. It is well established that goods do not become waste or scrap merely on account of prior use, so long as they retain their identity and functional utility. Waste and scrap arise only when goods lose their original utility and are fit solely for recovery of constituent material. 7.10 Now, for the purpose of classification under GST, reference is to be made to the Customs Tariff Act, 1975, along with the relevant Section Notes, Chapter Notes and the General Rules for the Interpretation of the Tariff. Heading 6305 of the Tariff covers "sacks and bags, of a kind used for the packing of goods", ....
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.... headings. Accordingly, the goods merit classification under Heading 6305. 7.13 It is further observed that a distinction based on the transaction value per piece in respect of goods falling under Heading 6305 originates from the entries under the Customs Tariff Act, 1975, which have been adopted for GST rate purposes. The relevant tariff entries under Chapter 63 classify sacks and bags of a kind used for packing goods based on their sale value. 7.14 Further, as per Schedule I of Notification No. 9/2025-Central Tax (Rate) dated 17.09.2025 by Notification No., Sr. No. 390 - Other made up textile articles, sets, of sale value not exceeding Rs. 2500 per piece attract GST at the rate of 5% (2.5% CGST + 2.5% SGST), and where the sale value exceeds Rs. 2500 per piece attract GST at the rate of 18% (9% CGST + 9% SGST). The relevant entries are produced below: Schedule I -2.5% SI.No. Chapter/Heading/Sub-Heading/Tariff Item Description (1) (2) (3) 390 63 [other than 6305 32 00, 6305 33 00, 6309] Other made up textile articles, sets, of sale value not exceeding Rs. 2500 per piece Schedule II -9 % Sl.No. Chapter/Heading/Sub Heading/Tariff Item D....