GST Rate on Sale of Used Gunny Bags: Advance Ruling KER/03/2026
The Authority for Advance Ruling clarified that used gunny bags sold by manufacturers are taxed as reusable packing material, not as scrap.
- Ruling
- ADVANCE RULING No. KER/03/2026 Dated 28/04/2026
- Dated
- 28 Apr 2026
- Authority
- 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
- Used gunny bags are classified as reusable packing material under Heading 6305.
- Bags sold for Rs 2500 or less per piece attract 5% GST.
- Bags sold for more than Rs 2500 per piece attract 18% GST.
- The ruling rejects the classification of these bags as waste or scrap.
In short
The company asked the Authority for Advance Ruling (AAR) how to tax used jute gunny bags sold after raw materials for cattle feed were removed. The business argued these bags were still useful and should not be treated as low-value scrap. The authority agreed, confirming that because the bags remain intact for reuse, they fall under a specific category for textile packing materials rather than waste.
What has changed
How it worked before
Businesses often assumed that any used packaging sold after the primary product was consumed should be classified as scrap, which typically carries different tax implications.
What has changed
The authority ruled that the tax rate depends on the sale price per bag. If you sell used bags that are still functional, you must check their value to apply either the 5% or 18% GST rate. This means you cannot simply label all used packaging as scrap to simplify your tax filing.
Who this affects
Manufacturers or traders who sell used jute bags or similar packing materials after emptying their raw material supplies.
An example
A flour mill sells empty jute bags that held wheat. If they sell these bags for Rs 50 each, this ruling suggests they should charge 5% GST. If they sold a specialized, high-value industrial bag for Rs 3000, they would charge 18% GST. They should not classify these as scrap under the 6310 heading.
What you should do
Review your sales of used packaging to see if they retain their original utility. Note that an Advance Ruling only binds the business that asked for it and their specific tax office. You should consult your own tax advisor to see if this logic applies to your specific inventory.
If you do nothing
If you incorrectly classify reusable bags as scrap, you may face a tax shortfall if the department decides they should have been taxed at a higher rate. This can lead to interest charges and penalties during a GST audit. Relying on a ruling that does not apply to your specific business can leave you without a legal defense if your local officer disagrees with your classification.
The terms explained
- Essential character
- The primary feature or purpose of an item that defines what it is for tax purposes.
- Heading 6305
- A specific category in the tax code used for sacks and bags of a kind used for the packing of goods.
- Value-based threshold
- A price limit that determines which tax rate applies to a product.
The ruling in detail
Authority for Advance Ruling
KERALA COOPERATIVE MILK MARKETING FEDERATION LIMITED
ADVANCE RULING No. KER/03/2026 Dated 28/04/2026 · Keralam
Questions before the authority
- What is the prevailing GST rate (CGST and SGST) for sale of Used Gunny Bags received during purchase of Raw materials for Cattle feed Manufacturing process and sold as Scrap?
Facts
The applicant is engaged in the manufacture of cattle feed and procures raw materials in jute gunny bags. After consumption of the raw materials, the empty gunny bags are sold via auction. The applicant contends these bags are reusable and not scrap, seeking clarification on their classification and applicable GST rate.
Ruling
| Question | What the authority ruled |
|---|---|
| GST rate for sale of used gunny bags | 5% (2.5% CGST + 2.5% SGST) if sale value <= Rs. 2500/piece; 18% (9% CGST + 9% SGST) if sale value > Rs. 2500/piece Applicable only to goods remaining intact and reusable as packing bags; worn out or waste bags may differ |
The authority ruled that the used gunny bags are not classifiable as scrap but as reusable packing bags under Heading 6305. The applicable GST rate depends on the sale value per piece. Bags with a sale value not exceeding Rs. 2500 per piece attract 5% GST, while those exceeding Rs. 2500 per piece attract 18% GST.
Reasoning
The authority determined that classification must be based on the **essential character** and commercial identity of the goods at the time of supply. Since the bags remain intact and are intended for reuse as packing material, they do not qualify as waste or scrap under HSN 391590 or 6310. The ruling relies on the **Customs Tariff Act, 1975**, and Notification No. 9/2025-Central Tax (Rate) dated 17.09.2025, which differentiates tax rates for textile articles based on their sale value.
Provisions relied on
- Section 97(2)(a) of the CGST Act, 2017
- Customs Tariff Act, 1975
- Heading 6305
- Heading 6309
- Heading 6310
- Notification No. 9/2025-Central Tax (Rate) dated 17.09.2025
For the practitioner
This ruling helps practitioners argue that used packing materials retaining their **original utility** should be classified under their functional heading rather than as scrap. It provides a clear **value-based threshold** for determining the GST rate on used gunny bags. It does not apply to bags that are torn, worn out, or otherwise rendered unfit for reuse.
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/AAR/kerala_co_operative_milk_marketing_federation_ltd.pdf
Legibility of the scan, as read: high.
Prepared 11-10-2026.
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