Classification and rate of GST on PP non-woven bags

PJ/Case Law/2018-2019/3499

Case: U S POLYTECH
Citation: 31/WBAAR/2018-19 dated 08.01.2019
Issue: Classification and rate of GST on PP non-woven bags
Brief facts:U S POLYTECH(herein after referred to as the applicant) is a a manufacturer of Polypropylene Non-Woven Bags which are mainly used by big industrial units, retail outlets and textile shops for packing of different goods and have been granted registration by the Office of the Textile Commissioner of Textile based products. The Applicant is of the opinion that PP Non-woven bags manufactured is classifiable under Tariff Head 6305 90 00 of the GST Tariff which is aligned to the First Schedule of the Customs Tariff Act, 1975 (hereinafter referred to as the "the Tariff Act").
Appellant’s contention:The Applicant relies on the order passed in case of the Office of the Commissioner of Central GST & Central Excise, Madurai vide C.No. IV/16/84/2017 –Tech (GST) Vol I dated 01.01.2018 that Non-woven bags and rice bags falling under HSN 6305 90 00 of Custom Tariff will attract GST @5% (SGST 2.5% and CGST 2.5%), if sale value does not exceed Rs. 1000/- and GST @ 12% (SGST 6% and CGST 6%) is sale value exceeds Rs.1000/- The Applicant also submits the order of AAR, Kerala wherein bags of non-woven fabrics are classified under Entry 224 of Schedule 1 of Notification 01/2017-Central Tax (Rate) dated 28.06.2018. The Applicant also submitted a copy of order No C3/17556/09/CT dated 29.09.2009 issued by the Department of Commercial Taxes, Kerala, in which it is clarified that non woven fabrics made of Polypropylene would fall under the general heading of 5603 of the Customs Tariff Act and under Entry 103 of SRO No 82/2006, and Packing Bags, textile bags and carry bags made out of non woven fabrics of polypropylene is covered under HSN 6305.33.00 and the mentioned HSN Code appears under Entry 174(7)(1) of List A of the Third Schedule to the KVAT Act, 2003. The Applicant stated that they are manufacturing a similar kind of product as is mentioned in the aforesaid Advance Ruling issued by AAR, Kerala dated 29.05.2018 and seeks to clarify whether the Applicant can also apply the same rate as stated in the Advance Ruling.
Respondent’s Contention and Judgment: The authority for Advance Ruling stated that it has considered the submissions made by the applicant in their application for advance ruling. The applicant has not submitted the details of the raw materials used for manufacturing, as well as the manufacturing process, product manufactured and their end use, but has simply referred to various judgments. However, by referring to the documents submitted by the appellant, it may be inferred that the raw materials are PP granules which are bonded to form a sheet before stitching them into bags.
The product being manufactured on which Ruling has been sought is the same as that mentioned in Advance Ruling Order No CT/5492/18-C3 dated 29.05.2018 issued by the Kerala Authority of Advance Ruling on M/s J J Fabrics. JJ Fabrics had submitted that the primary raw materials for polypropylene sheets are polypropylene granules, color master batches and filter content (calcium carbonate). They have provided the whole process of manufacturing in the ruling. JJ Fabric also submitted that the bags made out of these Polypropylene Sheets are used by industrial units, big retail outlets and textile shops for packing their commodities.
In light of the submission in the Application that the product manufactured by the Applicant is the same as that taken up by the Authority of Advance Ruling, Kerala, and the sample submitted by the Applicant, and in the absence of any contrary independent information provided by the Applicant, it is to be assumed that raw material of the non woven bags manufactured by them is Polypropylene, the manufacturing process involves obtaining a continuous single polypropylene filament, portions of which is lapped on each other on a lapper and then subject to thermal bonding to form a polypropylene sheet from which bags are made, which are used by industrial units, big retail outlets and textile shops for packing their commodities.
Tariff item 6305 33 00 under the GST Tariff covers sacks and bags, of a kind used for packing of goods, made, not of jute or of other textile bast fibres of Heading 5303, but of man-made textile materials which are not flexible intermediate bulk containers but are of polyethylene or polypropylene strip or the like.
The bags made by the Applicant are non-woven and are manufactured from polypropylene sheets, not from Polypropylene Strips.
Tariff item 6305 33 00, therefore, will not be an appropriate classification for the bags manufactured by the Applicant.
In its order dated 26/10/2018, disposing Appeal Case No. 06/WBAAAR/Appeal/2018 dated 08/08/2018, the West Bengal Appellate Authority for Advance Ruling (hereinafter the Appellate Authority) refers to the judgment in the case of Raj Pack Well Ltd [1993 (41) ECC 285 (Madhya Pradesh)]. In the aforesaid case the High Court examines the meaning of textile and fibre under sections 2(g) and 2(a) respectively of the Textile Committee Act, 1963, and concludes that plastic is not included in either textile or fibre. It examines the process of manufacturing HDPE woven bags and observes that they are made from plastic. The Appellate Authority has followed this judgment for ascertaining whether PP woven Leno bags are classifiable under Chapter 39, and classifies such bags as plastic goods.
Polypropylene sheets are, therefore, plastic, and, applying the ratio of the judgment in the matter of Raj Pack Well Ltd (supra), bags made from Polypropylene sheets are to be classified as plastic goods under Chapter 39. Sub-heading 3923 29 covers articles of conveyance or packing of goods, namely sacks and bags, made of plastics other than polyethylene. Polypropylene Non-Woven Bags that the Applicant manufactures, are therefore, classifiable under Sub-heading 3923 29.
Decision:The application Disposed of
Comment: Considering the ruling of the Kerala Ruling Authority and judgement of Raj Pack Well Ltd, it was concluded that polypropylene sheets are not classified under the Tariff item 6305 33 0. Since this GST Tariff covers sacks and bags. Polypropylene Non-Woven Bags are therefore considered as plastic bags and classifiable under Sub-heading 3923 29.
Prepared by: Himanshu Bhimani

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PJ/Case Law/2018-2019/3499

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