AAR Clarifies 18% GST Rate for Non-Biodegradable Paper Bags

The applicant, M/s SGS Packaging Private Limited, is a manufacturer of paper bags and sacks. They sought an advance ruling to determine the correct GST rate for their products following recent legislative changes. The applicant argued that their paper bags should be eligible for a lower GST rate of 5%.

The applicant contended that the conjunction “and” in the entry implies that all paper bags should be treated on par with biodegradable bags, regardless of whether the paper bags themselves are specifically certified as “bio-degradable” under environmental standards.

Issue Before Authority: Whether regular paper bags manufactured by the applicant qualify for the concessional 5% GST rate under Entry 319 of Schedule I or should be taxed at 18% under the residual category for paper products.

Authority Held: The Authority for Advance Ruling (AAR) ruled that the applicant’s paper bags are liable to GST at the rate of 18%. The Authority examined the entries in Notification No. 09/2025-Central Tax (Rate) and observed that the 5% rate is specifically targeted at “bio-degradable” products.

The RAAR noted that if all paper bags were intended to be covered at 5%, there would be no need for Entry 185 of Schedule II, which covers “All goods” of Heading 4819 (except specific cartons). The Authority clarified that Entry 319 must be read such that the adjective “bio-degradable” applies to the bags. Applicant’s products being standard paper bags not specifically categorized as biodegradable under the relevant entry’s scope, they fall under HSN 4819 and are taxable at 18% (9% CGST + 9% SGST).

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