Compostable Plastic Carry Bags Qualify as Biodegradable Bags at 5% GST: AAR Gujarat

The Gujarat Authority for Advance Ruling classified PLA-PBAT carry bags under HSN 39269099 and placed them in Entry 319 at 5%, subject to their biodegradability claim holding good.

The Gujarat Authority for Advance Ruling has held that carry bags made from compostable polymers are classifiable under sub-heading 39269099 and fall within Entry 319 of Schedule I to Notification No. 09/2025-Central Tax (Rate) dated 17 Sep 2025, which covers paper sacks and bags and biodegradable bags of Chapters 39 and 48. They attract GST at 5%, strictly subject to the validity of the applicant’s claim that the bags are biodegradable. [In Re: Shivish Bio Bag LLP, 2026-juristway.com-3271-AAR(Gujarat)-GST]

Sushma Vora, Member (SGST), and Vishal Malani, Member (CGST), gave the ruling. The Morbi-based applicant makes ‘Bio Carry Bags’ from compostable polymers or biodegradable plastic substitutes, which it had been classifying under HSN 39232990, and holds a certificate of compliance with ISO 17088:2021 for compostable plastics.

Finding no specific entry for such articles in headings 3901 to 3925, the Bench placed the bags under the residual heading 3926 and, within it, sub-heading 39269099. Entry 127 of Schedule II, at 18%, covers heading 3926, but the Bench examined Entry 319, a new entry with no counterpart in Notification No. 01/2017-Central Tax (Rate).

To understand the conjunction ‘and’ in that entry, the Bench examined the minutes of the 54th GST Council meeting held on 9 Sep 2024, where Maharashtra sought a lower rate on paper sacks and Meghalaya asked that starch-based biodegradable bags be included. It concluded that the entry covers both paper bags and biodegradable bags, and that Chapter 39 was included to encourage plastic bags that are biodegradable. It also referred to the EU policy framework, which treats compostable plastics as a subset of biodegradable plastics.

On evidence, the Bench relied on an interim report dated 11 Apr 2025 from a central government institute under the Ministry of Chemicals and Fertilizers, issued to the applicant’s sister concern, which supplies all its raw material. The sample, a blend of PLA and PBAT, left 8.1% dry mass after the 84-day disintegration test and showed 92.34% biodegradation at 133 days, both within ISO 17088 requirements. Tests for heavy metals, seed germination and earthworm toxicity were still in progress, and the interim report is valid only until the final test report is issued.

Having placed the bags in Entry 319, the Bench did not examine Entry 127 further. It ruled that the bags attract GST at 5% (2.5% CGST and 2.5% SGST), subject to the biodegradability claim being valid.

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