5% GST on Biodegradable Bags Only if Proven | AAR

Case Details: Easy Flux Polymers (P.) Ltd, In re [2026] 184 taxmann.com 52 (AAR-RAJASTHAN)

Judiciary and Counsel Details

• Dr Akhedan Charan, Member
• Rakesh Mehta & Imran Khan, C.As. for the Applicant.

Facts of the Case

The applicant was engaged in the manufacture and supply of polymer-based plastic bags and straws claimed to be biodegradable or compostable. It sought an advance ruling on the correct classification of such biodegradable/compostable bags under Chapter 39 or Chapter 48 and the applicable HSN, as well as the eligibility for concessional GST rate under the notification covering paper sacks/bags and biodegradable bags. The Applicant submitted that the biodegradable nature of the product warranted classification outside conventional plastic goods and justified concessional taxation at 5%. The matter was accordingly placed before the Authority for Advance Ruling (AAR).

AAR Held

The AAR held that the classification of the goods is determined by their material composition and use, rather than by their biodegradability; therefore, polymer-based bags are classifiable under Chapter 39, specifically under Heading 3923 as articles for packing of goods, falling under sub-heading 3923 29 90. It was observed that biodegradability does not alter the HSN classification where the product continues to be made of plastic polymers. The Authority referred to Section 9 of the CGST Act. It was held that the levy and rate of tax depend upon the applicable notification, and the benefit of a concessional rate under Entry No. 319 of Schedule I to Notification No. 9/2025-Central Tax (Rate), dated 17-09-2025 would be available only if the products are established to be biodegradable. In the absence of such a determination, the concessional rate cannot be applied, and the applicable GST rate would be as per the general classification under Chapter 39.