2019 (2) TMI 188 - AAR - GST

Classification of goods - rate of tax - Bags made of Non-Woven Fabrics of Polypropylene / 100% Cotton (Grey Fabrics) used the Packing of goods, commonly called as Stick Bags, Wedding Gift Bags, Re-useable Shopping Bags, Draw-String, Gift Bags, Garment Bags, etc. - Held that - The bags which are used for packing of goods for transport, storage and sale are covered under 6305 - In this case the bags of any materials are used for packing the goods which are then put up for sale, transport or storage. That is such goods because of their very nature, being loose, flowing or in bulk etc, cannot be sold without packing by such bags. However, in the instant case, the Applicant has stated that the goods in question are carry bags also called as Re-usable Shopping Bags, Drawstring Gift Bags, Garment Bags. These Bags have handles for carrying. Textiles or jewellery or other items after they are purchased by the Customers are put in these Bags and given to Customers to carry /take away from the shops. These bags are not used for packing, but for ease of carrying being in the nature of Shopping Bags. The carry bags or shopping bags are covered in the Customs Tariff under CCTH 420222 depending on the material they are made up of. Shopping bags made of cotton are classified under CTH 42022220 and those made of non-woven fabrics are classifiable under CTH 42022210. Rate of tax - Held that - Non-woven and cotton carry bags supplied by the Applicant were taxable to 9% CGST and 9% SGST as per SI no 126 and 127 of Schedule III of Notification No. 01/2017-CT (Rate) dated 28.06.2017 and G.O. (Ms) No. 62 dated 29.06.2017 No. II (2)/CTR/532(d-4)/2017 as amended respectively - the Carry Bags/Shopping Bags made-up of Cotton are taxable at 6% under CGST Act 2017 and at 6% under SGST Act 2017 as per Sl.No.89 of Schedule II while those Carry Bags made of Non-woven Fabrics are taxable to 9% under CGST Act 2017 and 9% under SGST Act 2017 as per Sl.No.124 of Schedule III of Notification No. 01/2017-CT (Rate) dated 28.06.2017 and G.O. (Ms) No. 62 dated 29.06.2017 No. II (2)/CTR/532(d-4)/2017 as amended respectively.

Summary

Issues Involved: Classification of bags made of Non-Woven Fabrics of Polypropylene / 100% Cotton (Grey Fabrics) and the applicable rate of tax under the GST Act 2017.

Detailed Analysis:

1. Classification of Bags:

The applicant manufactures various types of bags, including Stick-Bags, Wedding Gift Bags, Packing Bags, Re-usable Shopping Bags, Draw-String Gift Bags, and Garment Bags, made from Non-woven Fabrics of Polypropylene and 100% Cotton (Grey Fabrics). The primary raw materials for these bags fall under heading 5603 (Non-woven Fabrics) and heading 5208 (Woven Fabrics of 100% Cotton) of the Customs Tariff Act 1975.

The classification of Non-Woven Fabrics of Polypropylene is guided by Chapter 56 of the Customs Tariff Act, which includes non-wovens impregnated, coated, covered, or laminated with plastics or rubber. The bags made from these materials are classified under Tariff item No. 6305 33 00 as "Sacks and Bags, of a kind used for packing of goods, of man-made textile materials, of Polypropylene strip or the like." Bags made of cotton are classified under Tariff Item No. 6305 20 00.

During the hearing, the applicant demonstrated the manufacturing process, which involves converting Non-woven Fabric rolls into sheets, printing, and stitching them into bags used by various commercial outlets for packing their products. The Authority examined the samples and records, noting that the bags are used for carrying goods and are referred to as Re-usable Shopping Bags, Drawstring Gift Bags, and Garment Bags.

2. Applicability of Actual Rate / Heading:

The classification under Chapter 6305 covers textile sacks and bags used for packing goods for transport, storage, or sale. However, the applicant’s bags, which are used as carry bags or shopping bags, do not fit this category. Instead, they fall under Chapter Heading 4202, which includes items like trunks, suitcases, vanity cases, and shopping bags. Specifically, shopping bags made of cotton are classified under CTH 4202 22 20, and those made of non-woven fabrics under CTH 4202 22 10.

3. Applicable Rate of Tax:

Initially, Non-woven and Cotton Carry Bags were taxable at 9% CGST and 9% SGST as per SI Nos. 126 and 127 of Schedule III of Notification No. 01/2017-CT (Rate) dated 28.06.2017. However, from 15.11.2017, the tax rate for Cotton Carry Bags/Shopping Bags was reduced to 6% under CGST and 6% under SGST as per SI No. 89 of Schedule II. Non-woven Carry Bags continued to be taxed at 9% under CGST and 9% under SGST as per SI No. 124 of Schedule III.

Ruling:

1. Non-Woven carry bags are classifiable under CTH 4202 22 10, and cotton carry bags under CTH 4202 22 20.
2. Up to 14.11.2017, Non-woven and Cotton Carry Bags/Shopping Bags were taxable at 9% under CGST and 9% under SGST.
3. From 15.11.2017 onwards, Cotton Carry Bags/Shopping Bags are taxable at 6% under CGST and 6% under SGST, while Non-woven Carry Bags remain taxable at 9% under CGST and 9% under SGST.