GST Classification and Tax Rate for Biodegradable Bags
The Appellate Authority ruled that while biodegradable bags fall under Chapter 39, their eligibility for a 5% GST rate depends on field verification.
- Ruling
- ORDER NO. 01/2026-27 DATED 02.04.2026
- Dated
- 02 Apr 2026
- Authority
- Appellate Authority for Advance Ruling
This page was written by Patron Accounting’s AI from the official release and reviewed before publishing. It explains the document in plain language. It is not the document itself. Where this page and the original differ, the original governs.
The short version
- Biodegradable bags are classified under Chapter 39 of the GST tariff.
- The authority cannot verify scientific claims of biodegradability.
- Eligibility for the 5% GST rate requires proof of actual product characteristics.
In short
Easy Flux Polymers asked if their compostable bags qualify for a lower 5% GST rate under Notification 9/2025-CTR. The authority confirmed the classification but refused to certify the bags as 'biodegradable' for tax purposes, stating that scientific verification is outside their scope.
What has changed
How it worked before
Businesses often assumed that holding third-party environmental certifications was sufficient to claim concessional tax rates for eco-friendly products.
What has changed
The authority decided that GST forums will not rule on technical compliance. In practice, your local tax officer can now challenge your 5% rate by testing your product, regardless of any certifications you hold.
Who this affects
Manufacturers and suppliers of compostable or biodegradable plastic bags.
An example
A manufacturer of compostable grocery bags claims the 5% GST rate based on a lab report. Under this ruling, the tax department can ignore that report and send the bags for independent testing. If the test fails, the manufacturer will owe the difference in tax plus interest and potential penalties.
What you should do
This ruling only applies to the company that asked. If you sell similar bags, do not assume you automatically qualify for the 5% rate; ensure your product meets all environmental standards, as your local tax officer may verify this during an audit.
If you do nothing
If you apply the 5% rate without being able to prove your product's composition, a tax officer may issue a demand notice for the unpaid tax. You would then be liable for the higher rate, interest, and penalties for incorrect tax payment.
The terms explained
- Chapter 39
- A section of the GST tariff that covers plastics and articles made of plastic.
- Advance Ruling
- A formal decision from tax authorities on how GST laws apply to a specific business transaction.
- Field formation
- The local GST office or tax officers who handle your daily assessments and audits.
The ruling in detail
Appellate Authority for Advance Ruling
M/s Easy Flux Polymers Private Limited, 704, Munglam Funsquare, Durga Nursery Road, Udaipur (Rajasthan) - 313001
ORDER NO. 01/2026-27 DATED 02.04.2026 · Rajasthan
Questions before the authority
- Whether the Applicant's biodegradable bags are classifiable under Chapter 39 (if of plastic/compostable polymer) or Chapter 48 (if of paper), and the appropriate HSN therein.
- Whether supplies of the said biodegradable bags are covered by the entry 'Paper Sacks/Bags and bio-degradable bags' (Ch. 39, 48) in Schedule I of Notification 9/2025-CTR, attracting 5% GST (2.5% CGST + 2.5% SGST), w.e.f 22-Sep-2025.
Facts
The appellant manufactures and supplies compostable plastic bags, claiming them to be eco-friendly substitutes for conventional plastic bags. They hold various certifications, including CPCB, CIPET, and TÜV Rheinland, confirming compostability and biodegradability. The appellant sought an advance ruling to determine the classification and eligibility for a concessional 5% GST rate under Notification No. 09/2025-CTR.
Ruling
| Question | What the authority ruled |
|---|---|
| Classification/HSN | Classifiable under Chapter 39, Heading 3923, sub-heading 3923 29 90. Classification is independent of whether the material is biodegradable or not. |
| Rate of tax & applicability of notification | Eligible for 5% GST if the bags are biodegradable; otherwise, the general rate applies. The Advance Ruling Authority is not the competent body to verify biodegradability. |
The Appellate Authority upheld the original ruling, confirming that the bags are classifiable under Chapter 39. It held that the authority lacks the jurisdiction to determine the scientific or technical standards of biodegradability, which falls under the purview of environmental authorities. Consequently, the benefit of the concessional rate is contingent upon the product actually being biodegradable, a fact that must be verified by field formations.
Reasoning
The authority reasoned that while the classification under Chapter 39 is clear, the determination of whether a product meets the technical standards for 'biodegradability' is a scientific matter outside the scope of the GST advance ruling forum. It noted that the appellant's certifications were self-drawn and that the exemption under Notification No. 09/2025-CTR is strictly conditional upon the product's actual characteristics. The authority emphasized that the jurisdictional GST field formation is the appropriate body to draw samples and verify compliance with environmental standards. It relied on Section 97(2) of the CGST Act, 2017, to define the limits of its jurisdiction.
Provisions relied on
- Section 97(2) of the CGST Act, 2017
- Section 100 of the CGST Act, 2017
- Section 101 of the CGST Act, 2017
- Notification No. 09/2025-CTR dated 17.09.2025
- Plastic Waste Management Rules
For the practitioner
This ruling clarifies that the **Advance Ruling Authority will not adjudicate on technical or scientific compliance** such as biodegradability, even if the applicant provides third-party certifications. Practitioners should note that while the classification of such bags is settled under Chapter 39, the **concessional tax benefit remains subject to verification** by field officers. It effectively shifts the burden of proving product characteristics to the taxpayer during regular assessment proceedings.
Source
This is a summary prepared from the published order, which is a scanned document. It is a reading aid and not the authority: where the two differ, the order governs. Verify every provision against the original before relying on it.
Original order: https://www.gstcouncil.gov.in/sites/default/files/2026-05/easy_flux_polymers_private_limited.pdf
Legibility of the scan, as read: high.
Prepared 11-10-2026.
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