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2019 (2) TMI 189 - AAR - GSTClassification of goods - rate of tax - Nonwoven and Cotton bags - Held that - 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 of cotton/jute are taxable at 6% CGST and at 6% SGST as per SI no 89 of Schedule II while those carry bags made of non-woven fabrics are taxable to 9% CGST and 9% SGST as per SI 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.
Issues Involved:
1. Classification of Nonwoven and Cotton bags under the GST Act. 2. Applicable rate of tax for Nonwoven and Cotton bags under the GST Act. Detailed Analysis: Issue 1: Classification of Nonwoven and Cotton bags under the GST Act The applicant manufactures Nonwoven and Cotton bags, used primarily for packing products in textile showrooms, jewelry shops, etc. They sought clarification on the classification of these bags under the GST Act, proposing that these should fall under CTH 6305, which pertains to "Sacks and bags, of a kind used for the PACKING OF GOODS," and should be taxed at 5%. Upon examination, it was found that the bags produced by the applicant are carry bags with handles, used by customers to carry purchased goods from shops, rather than for packing goods for transport, storage, or sale. Therefore, these bags do not fit under CTH 6305, which covers bags used for packing goods for transport, storage, or sale. Instead, the appropriate classification for these carry bags falls under Chapter Heading 4202, which includes "Trunks, suit-cases, vanity-cases, executive-cases, brief-cases, school satchels, spectacle cases, binocular cases, camera cases, musical instrument cases, gun cases, holsters and similar containers; travelling-bags, insulated food or beverages bags, toilet bags, rucksacks, handbags, shopping-bags, wallets, purses, map-cases, cigarette-cases, tobacco-pouches, tool bags, sports bags, bottle-cases, jewellery boxes, powder-boxes, cutlery cases and similar containers, of leather or of composition leather, of sheeting of plastics, of textile materials, of vulcanized fiber or of paperboard, or wholly or mainly covered with such materials or with paper." Specifically, the Nonwoven carry bags fall under CTH 4202 22 10 ("Hand bags and shopping bags, of artificial plastic material"), and Cotton carry bags fall under CTH 4202 22 20 ("Hand bags and shopping bags, of cotton"). Issue 2: Applicable rate of tax for Nonwoven and Cotton bags under the GST Act Initially, both Nonwoven and Cotton carry bags were taxable at 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. However, effective from 15.11.2017, the tax rate for Cotton carry bags was revised to 6% CGST and 6% SGST as per SI no 89 of Schedule II. The tax rate for Nonwoven carry bags remained at 9% CGST and 9% SGST as per SI no 124 of Schedule III. Ruling: 1. Nonwoven carry bags supplied by the Applicant are classifiable under CTH 4202 22 10, and Cotton carry bags are classifiable under CTH 4202 22 20. 2. Up to 14.11.2017, both Nonwoven and Cotton carry bags were taxable at 9% CGST and 9% SGST. From 15.11.2017 onwards, Cotton carry bags are taxable at 6% CGST and 6% SGST, while Nonwoven carry bags continue to be taxable at 9% CGST and 9% SGST.
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