GST Classification and Tax Rates for Compostable Carry Bags
The Authority for Advance Ruling confirmed the HSN code for compostable bags but declined to verify their biodegradable status for tax purposes.
- Ruling
- ADVANCE RULING NO. RAJ/AAR/2025-26/22, dated 27.02.2026
- Dated
- 27 Feb 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
- The company asked for the HSN classification of compostable carry bags.
- The Authority confirmed classification under HSN code 39232990.
- The 5% concessional GST rate applies only if the product is truly biodegradable.
- The Authority will not perform scientific testing to verify biodegradability claims.
In short
A business asked the Authority for Advance Ruling (AAR) to confirm the HSN code and the 5% GST rate for their compostable carry bags. While the authority confirmed the HSN code, it refused to confirm whether the bags qualify as biodegradable for the lower tax rate.
What has changed
How it worked before
Businesses often assumed that obtaining a certificate for compostable materials was sufficient to automatically qualify for concessional GST rates.
What has changed
The ruling clarifies that the AAR will not act as a technical testing lab. You must be prepared to prove your product's biodegradability independently to claim the 5% rate, as the tax authority will not validate your scientific claims.
Who this affects
Manufacturers and suppliers of biodegradable or compostable plastic carry bags.
An example
A manufacturer produces bags using a new polymer blend and wants to pay 5% GST. They ask the AAR to confirm their product qualifies for the lower rate. The AAR confirms the HSN code but tells the manufacturer they must prove the bags are biodegradable themselves. The manufacturer must now keep their lab test reports ready for any future tax audit.
What you should do
Ensure you have valid, up-to-date technical certifications for your products. Remember that this ruling only binds the company that asked; your local tax officer may still challenge your classification or tax rate if they disagree with your evidence.
If you do nothing
If you apply the 5% rate without sufficient proof of biodegradability, a tax officer may demand the difference in tax plus interest and penalties. Assuming this ruling protects you is a mistake, as it only applies to the specific business that requested it. You risk a costly dispute if your product does not meet the technical standards required by law.
The terms explained
- HSN
- Harmonized System of Nomenclature is a code used to classify goods for taxation purposes.
- Concessional tax rate
- A lower rate of tax offered by the government for specific types of goods.
- Biodegradable
- A material capable of being decomposed by bacteria or other living organisms.
The ruling in detail
Authority for Advance Ruling
M/s PRADEEP VERMA, J-61, AGRO BLOCK, SGC KARNI INDUSTRIAL AREA, Bikaner-334004, Rajasthan
ADVANCE RULING NO. RAJ/AAR/2025-26/22, dated 27.02.2026 · Rajasthan
Questions before the authority
- Whether bio compostable carry bags manufactured from compostable polymer materials and certified under IS/ISO 17088 are classifiable under Chapter 39, heading 3923, sub-heading 39232990.
- Whether the supply of such biodegradable/compostable carry bags is covered of Schedule I of Notification No. 9/2025 - Central Tax (Rate) dated 17-09-2025, attracting GST @ 5% (2.5% CGST + 2.5% SGST) with effect from 22-09-2025.
Facts
The applicant is engaged in the manufacture and supply of biodegradable and compostable carry bags made from certified compostable polymer materials like PBAT and PLA. They sought a ruling on the correct HSN classification and the applicability of the concessional 5% GST rate under Notification No. 9/2025-Central Tax (Rate). The products are certified by the CPCB and tested by CIPET for compliance with IS/ISO 17088 standards.
Ruling
| Question | What the authority ruled |
|---|---|
| HSN Classification | Classifiable under Chapter 39, heading 3923, sub-heading 39232990. Based on the material composition of the bags. |
| Applicability of 5% GST rate | Applicable if the goods are biodegradable as understood in the context of the entry. The Authority did not determine if the applicant's specific product is biodegradable. |
The Authority held that the products are classifiable under Chapter 39, heading 3923, sub-heading 39232990. Regarding the tax rate, it ruled that the concessional rate of 5% under Entry 319 of Schedule I of Notification No. 9/2025-Central Tax (Rate) is applicable only if the goods are indeed biodegradable, a fact the Authority declined to verify.
Reasoning
The Authority determined that it lacks the jurisdiction to perform scientific or technical testing to verify the **biodegradability or compostability** of the applicant's products. It concluded that the classification under Chapter 39 is independent of the material's biodegradability. Consequently, while it confirmed the HSN, it stated that the **concessional rate** under Entry 319 of Notification No. 9/2025-Central Tax (Rate) is conditional upon the goods actually being biodegradable, leaving the burden of proof on the applicant.
Provisions relied on
- Section 97(2) of the CGST/RGST Act, 2017
- Notification No. 9/2025 - Central Tax (Rate) dated 17-09-2025
- Entry 319 of Schedule I of Notification No. 9/2025 - Central Tax (Rate)
For the practitioner
This ruling confirms the HSN classification for compostable bags but highlights a significant limitation: the AAR will not certify the technical status of a product as 'biodegradable'. Practitioners should note that while the **concessional tax rate** is acknowledged, the benefit is strictly conditional, and the AAR will not provide a 'stamp of approval' on the underlying scientific claims of the product.
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/aar_pradeep_verma.pdf
Legibility of the scan, as read: high.
Prepared 12-10-2026.
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