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2020 (3) TMI 294 - AAR - GSTClassification of goods - Non-woven PP Rice Bags / Sacks - classified under the classification of HSN 63053300 or not? - rate of tax - HELD THAT - It is clear from Chapter Note 1 to Chapter 39 that The expression, however, does not apply to materials regarded as textile materials of Section XI. Therefore, plastics under Chapter 39 does not cover Non woven textile materials of CTH 5603 of which the articles in hand are made of - Further, as per para 7.5 of the CBIC clarification above, Non-laminated woven bags are to be classified as per the constituting material. There is no dispute that the raw material used by the applicant is a textile material classified under CTH 5603 as seen from the Purchase Invoice furnished by the applicant. The applicant manufactures non-woven fabric bags from the fabric roles classified under 5603 and is used mainly for packing rice and food products for storage and sale. Thus applying the Explanation of HSN to Heading 6305, the product is classifiable under Chapter Heading 6305 3300. Applicable rate of tax - HELD THAT - The applicable rate for the bag of value not exceeding ₹ 1000 per piece is 2.5% CGST as per SI.No. 224 of schedule I of Notification No 1/2017-C.T.(Rate) dated 28.06.2017 and 2.5% SGST as per S.No. 224 of Schedule-I of G.O.(Ms.) No. 62 dated 29.06.2017 No. II(2)/CTR/532(d-4)/2017 upto 30.09.2019 and thereupon upto 31.12.2019, the applicable rate is 6% CGST as per SI.No. 80AA of Schedule II of Notification no. 01/2017-C.T(Rate) dated 28.06.2017 as amended and 6% SGST as per S.No. 80AA of Schedule-II of G.O. (Ms.) No. 62 dated 29.06.2017 as amended and effective 01.01.2020, the applicable rate is 9% CGST as per SI.No. 163B of Schedule III of Notification no. 01/2017-C.T.(Rate) date 28.06.2017 as amended by Notification no.27/2019-C.T.(Rate) dated 30.12.2019 and 9% SGST as per S.No. 163B of Schedule-Ill of G.O. (M.S.) No. 62 dated 29.06.2017 as amended.
Issues Involved:
1. Classification of "Non-woven PP Rice Bags / Sacks" under HSN code. 2. Applicable rate of tax for "Non-woven PP Rice Bags / Sacks". Issue-wise Detailed Analysis: 1. Classification of "Non-woven PP Rice Bags / Sacks" under HSN code: The applicant, a manufacturer of sacks and bags made from non-woven polypropylene fabric, sought clarification on the classification of their product under the Harmonized System of Nomenclature (HSN). They claimed that their product, "Non-woven PP Rice Bags / Sacks," should fall under HSN code 63053300. The applicant detailed the manufacturing process, which involves purchasing non-woven fabric rolls classified under HSN code 5603, cutting them into sheets, printing designs, and stitching them into bags. These bags are primarily used for packing rice and other food products. The jurisdictional Central Tax Officer supported the applicant’s claim by referencing a similar case where non-woven fabric bags were classified under HSN 63053300. The Authority for Advance Ruling (AAR) examined the relevant HSN codes and explanatory notes. They identified that non-woven fabrics fall under CTH 5603, and sacks and bags of a kind used for packing goods fall under HSN 6305. The AAR concluded that the product in question, being non-woven fabric bags used for packing rice, is correctly classified under HSN 63053300. 2. Applicable rate of tax for "Non-woven PP Rice Bags / Sacks": The applicant argued that the applicable tax rate for their product should be 5% (2.5% CGST and 2.5% SGST) if the sale value does not exceed ?1,000 per piece, based on S.No. 224 of Schedule I of Notification No. 1/2017-C.T.(Rate) dated 28.06.2017. The AAR reviewed the relevant notifications and amendments. Initially, the applicable rate of tax for non-woven fabric bags under HSN 63053300 was 5% (2.5% CGST and 2.5% SGST) for bags valued below ?1,000 per piece, as per S.No. 224 of Schedule I of Notification No. 1/2017-C.T.(Rate) dated 28.06.2017. However, effective from 30.09.2019, Notification No. 14/2019-C.T.(Rate) amended the tax rate to 12% (6% CGST and 6% SGST) for such bags, as per S.No. 80AA of Schedule II of Notification No. 1/2017-C.T.(Rate). Further, effective from 01.01.2020, Notification No. 27/2019-C.T.(Rate) amended the tax rate to 18% (9% CGST and 9% SGST) for non-woven bags under HSN 63053300, as per S.No. 163B of Schedule III of Notification No. 1/2017-C.T.(Rate). Ruling: 1. The Non-woven fabric bags called as ‘Rice Bag’ fall under HSN 63053300. 2. The applicable rate for the bag of value not exceeding ?1,000 per piece is: - 2.5% CGST and 2.5% SGST up to 30.09.2019, as per S.No. 224 of Schedule I of Notification No. 1/2017-C.T.(Rate). - 6% CGST and 6% SGST from 30.09.2019 to 31.12.2019, as per S.No. 80AA of Schedule II of Notification No. 1/2017-C.T.(Rate). - 9% CGST and 9% SGST effective from 01.01.2020, as per S.No. 163B of Schedule III of Notification No. 1/2017-C.T.(Rate).
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