Non-woven carry bags taxable at 18% GST whereas Cotton carry bags to be taxed at 12% GST w.e.f. November 15, 2017 onwards: AAR of Tamil Nadu

Categories: Advance Ruling
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Fact: M/S. Balu Ramamoorthy Sekar (“the applicant”) is a manufacturer of Non-woven Bags and Cotton Bags. The basic raw material for Non-woven Bags is Non-woven Fabrics made up of “Poly propylene”. They receive Poly-Propylene rolls of (size) 63″ Width and also in customized sizes as per their requirements. In respect of manufacturing of Cotton bags, the Applicant have stated that the basic raw material is “Cotton Cloth” (mainly GADA Cloth) received in bundles of standard size of 100 meters. They are cut, printed and stitched according to the requirements of the customers. Non-woven Bags and cotton bags are covered under various headings at different rates of tax as follows: Heading: 4202 – 18 % or 12% , Heading: 5603 – 12 %, Heading: 6305 – 5%. Further the applicant has sought clarification on applicable rate of tax out of these headings.

Issue Involved: Classification of Nonwoven and Cotton bags and the Rate of tax to be charged under the GST Act?

Applicant’s Interpretation of law: The Applicant stated that they purchase Non-woven fabric and Cotton fabric and print the name on the fabric as requests customer. The bags have handles made out of same materials or PVC sticks or Bamboo Sticks. The Non-woven fabrics in Poly-Propylene spun fabric and printing and stitching are done manually. These carry bags are sold to textile shops that put the textiles bought in the bags while selling the textiles. They also furnished copies of purchase and sales invoices relating to Pre-GST and Post-GST regime for perusal. Further, the applicant contended that the products are to be classified under 6305 and charged at a GST rate of 5%.

Held: The Hon’ble AAR of Tamil Nadu vide its Advance Ruling order no. 19/AAR/2018 dated November 18, 2019 stated that Non-Woven carry bags supplied by the Applicant are classifiable under CTH 4202 22 10 and cotton carry bags supplied by the Applicant are classifiable under CTH 4202 22 20. Up to November 14, 2017, Non-woven and cotton carry bags supplied by the applicant were taxable at 18% GST as per Sl no. 126 and 127 of Schedule III of Notification No. 01/2017-CT (Rate) dated June 28, 2017 and G.O. (Ms) No. 62 dated June 29, 2017 No. II (2)/CTR/532(0-4)/2017 as amended respectively. From November 15, 2017 onwards, Cotton Carry Bags are taxable at 12% GST as per Sl no. 89 of Schedule II while Non woven carry bags are taxable to 18% GST as per Sl. no 124 of Schedule III of Notification No. 01/2017-CT (Rate) dated June 28, 2017 and G.O. (Ms) No. 62 dated June 29, 2017 No. II (2)/CTR/532(0-4)/2017 as amended respectively.

Citation: [2019] 102 taxmann.com 39 (AAR – TAMILNADU)