Note : Any Appeal against the Advance Ruling order shall be filed before the Tamil Nadu State Appellate Authority for Advance Ruling, Chennai under Sub-section (1) of Section 100 of CGST ACT/TNGST Act 2017 within 30 days from the date on which the ruling sought to be appealed against is communicated.

At the outset, we would like to make it clear that the provisions of both the Central Goods and Service Tax Act and the Tamil Nadu Goods and Service Tax Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the Central Goods and Service Tax Act would also mean a reference to the same provisions under the Tamil Nadu Goods and Service Tax Act.

Balu Ramamoorthy Sekar, Secretary, The Madurai District Non-woven Bag and Cotton Bag Manufacturing Association having registered office at No. 19-B, Meenakshi Nagar, 3rd Street, Villapuram, Madurai – 625 012 (hereinafter called the Applicant) is Registered under the GST Act, 2017 with Trade name SAVANI SCREEN and GSTIN 33CJOPS0399M1ZE. They have filed an Application Seeking Advance Ruling in form GST ARA-01.

“Classification of Nonwoven and Cotton bags and the Rate of tax to be charged under the GST Act.”

The Applicant has submitted a copy of Challan evidencing payment of application fees of ₹ 5, 000/- each under sub-rule (1) of Rule 104 of CGST rules 2017 and SGST Rules 2017.

2.1 The Applicant manufactures Non-woven Bags and Cotton Bags. The basic raw material for Non-woven Bags is Non-woven Fabrics made up of “Polypropylene”. They receive Poly-Propylene rolls of (size) 63” Width and also in customized sizes as per their requirements. The Non-woven fabric rolls are first cut into sheets of needed size, then the sheets are printed according to requirements of Customers such as designs, shop name and address, and finally stitched to finish goods. The price of the bags ranges between minimum ₹ 5.50 per bag and maximum ₹ 20 per bag. The size of the Non-woven Bags varies from 8”x10” (Minimum) and 21”x19” (Maximum). These bags are wholly and exclusively supplied to Textile show rooms/Textile dealers, Jewelry shops and used for packing of their products.

2.2 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. The size of the Cotton Cloth Bags varies from (Minimum) 12”x15” to (Maximum) 16”x20”. These bags are wholly and exclusively supplied to Textile show rooms/Textile dealers, jewelry shops used for packing of their products.

2.3 They have further stated that their products, namely, 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 %

Hence, clarification was sought to applicable rate of tax out of these headings. The applicant’s interpretation is that the end products are used only for packing and are to be classified under CTH 6305 and charged to 5% GST.

3. The Applicant was personally heard on the matter. They submitted samples of Non-woven fabric and Cotton bags. They stated that they purchase Non-woven fabric and Cotton fabric and print the name on the fabric as requested by the 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.

4. Contentions of the Applicant was examined with connected samples and sale and purchase invoices submitted. It is seen from samples that the raw materials are non-woven and cotton fabric and the finished products made of these raw materials are bags with various logos, names, addresses of textile and jewelry shops printed on them. The bags have handles made of either same material or PVC or bamboo sticks. They are carry bags which are given to customers of these shops. The purchase invoices indicate purchase of non woven fabrics and plain cotton cloth. It is seen in the sale invoices that the applicant is variously describing them as “Bags”, “Shopping Bags” etc. of various sizes.

5. The Classification of the bags and the applicability of the Actual Rate / Heading is the issue to be discussed and clarified. From the various submissions of the applicant, it is evident that the applicant purchases non-woven fabric roll and cotton fabric, cut to size and on printing, stitch into bags. The sheets are printed according to requirements of Customers such as designs, shop name and address. The bags have handles made out of same materials or PVC sticks or Bamboo Sticks which are used as carry bags in Textile show rooms/Textile dealers, jewelry shops. The Applicant has sought the classification and has stated that 4202, 5603, 6305 are the competing Chapter Headings.

5.1 In terms of explanation (iii) and (iv) to Notification No. 1/2017 – Central Tax (Rate) dt. 28-06-2017, “Tariff item”, “Sub-heading”, “Heading” and “Chapter” shall mean respectively a tariff item, sub-heading, heading and chapter as specified in the First Schedule to the Customs Tariff Act, 1975 and the rules for the interpretation of the First Schedule to the Customs Tariff Act, 1975, including the Section and Chapter Notes and the General Explanatory Notes of the First Schedule shall be applied for the interpretation and classification of goods. Accordingly, the competing headings are examined as under:

5.2 The applicant’s contention is that the products are to be classified under 6305.

Chapter 6305:

6306      TARPAULINE AWNINGS AND SUNBLINDS: TENTS

HSN explanatory Notes to chapter 6305 states:

This heading covers textile sacks and bags of a kind normally used for the packing of goods tor transport, storage or sale.

These articles, which vary in size and shape, include in particular flexible intermediate bulk containers, coal, grain, flour, potato, coffee or similar sacks, mail bags, and small bags of the kind used for sending samples of merchandise by post. The heading also includes such articles as tea sachets.

It is evident that 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. The bags have handles for carrying. Textiles or Jewellery etc. 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.

Chapter Heading 4202:

From the above, it is seen 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.

5.3 Having decided the classification, the next to be answered is the applicable rate of tax.

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 relevant entries are found in Schedule III attracting 9% tax as given under:

The said entries stands amended vide Notification No. 41/2017- C.T(Rate) dated 14.11.2017 effective from 15.11.2017. The Hand bags and Shopping bags made of cotton and jute were moved from schedule III to Schedule II attracting rate of tax of 6%-CGST.

(B) in Schedule II -6%, –

(xii) for S. Nos. 89, 90 and the entries relating thereto, the following shall be substituted, namely

and the entries at Schedule III from 124 to 130 were replaced as under:

(C) in Schedule III-9%, –

(xl) in S. No. 124. for the entry in column (3). the entry “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, of sheeting of plastics, of textile materials, of vulcanised fibre or of paperboard, or wholly or mainly covered with such materials or with paper [other than handbags and shopping bags, of cotton or jute]” shall be substituted:

(xli) after S. No. 124 and the entries relating thereto, the following serial numbers and the entries shall be inserted, namely: –

(xlii) S. No. 125, 126, 127, 128, 129 and 130 and the entries relating thereto shall be omitted:

From the above, it is evident that 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.

6. In view of the foregoing, we rule as under:

RULING

1. 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.

2. Upto 14.11.2017, Non-woven and cotton carry bags supplied by the applicant were taxable at 9% CGST and at 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. From 15.11.2017 onwards, Cotton Carry Bags are taxable at 6% CGST and at 6% SGST as per SI no 89 of Schedule II while Non-woven carry bags 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.