AAR Classifies Biodegradable and Compostable Plastic Bags Under 5% GST Bracket

The applicant, M/s Easy Flux Polymers Private Limited, is a manufacturer of biodegradable and compostable bags. These bags are produced using compostable polymers (plastic) rather than traditional petroleum-based plastics.

The applicant sought an advance ruling to clarify the correct HSN classification and the applicable GST rate for their products. Their primary contention was that these eco-friendly bags should be treated on par with paper bags/sacks, thereby attracting a lower GST rate of 5% as per the amended entries in the GST rate notifications.

Main Issues: Whether biodegradable/compostable bags made of plastic polymers are classifiable under HSN 3923 or should be classified under Chapter 48 (Paper). Whether these bags are eligible for the 5% GST rate under the specific entry for “Paper Sacks/Bags and bio-degradable bags” in Notification No. 9/2025-CTR.

AAR’s Ruling: The Authority for Advance Ruling (RAAR) ruled that the products are classifiable under HSN 3923 29 90, which covers “Sacks and bags… of other plastics.” Despite being biodegradable, the base material remains a polymer, placing it within Chapter 39.

The Authority observed that Notification No. 9/2025-Central Tax (Rate), effective from September 22, 2025, specifically expanded the 5% tax bracket to include “bio-degradable bags” under Chapters 39 and 48. Thus the RAAR held that the applicant’s biodegradable/compostable plastic bags are now eligible for the concessional GST rate of 5% (2.5% CGST + 2.5% SGST).

To Read Full Judgment, Download PDF Given Below