The Uttar Pradesh Authority of Advance Ruling ( AAR ) has ruled that Eco-friendly expandable paper wrap (honeycomb paper for wrapping) attracts 18% GST.
M/s V.M. Technocoatings were undertaking a process to prepare eco-friendly expandable paper wrap (replacement of bubble wrap) from kraft paper and to sell the same in the open market.
They prepare the core material by using two or more sheets of honeycomb-like structure kraft paper which is glued together in an alternate glue strip pattern to create the structure of multiple layers of kraft paper in the vertical direction.
These corrugated layers open out in the form of a continuous honeycomb-like grid with the centre of each corrugated strip attached to another layer of corrugated strip upon expansion. Depending upon the product being packed with this material, multiple paper honeycomb wraps may be glued together to make the specific design of the packing material.
These paper honeycombsare used in the primary packing of goods as cushioning material, separators or edge protectors, to make shipping cartons of goods and as pallets and pallet boxes.This paper honeycomb wrap consists of 80 to 90% of kraft paper and the rest is other adhesive, hence this paper honeycomb wrap classifies under HSN 4808 category. Contrary to this, the 4823-chapter heading is more oriented towards ‘other paper, paperboard, cellulose wadding and webs of cellulose fibres’ etc. and not specific to kraft paper products.
It was submitted that the product ‘eco-friendly expandable paper wrap’ merit classification under HSN 48084090 and the jurisdictional authority has opined that the product merit classification under HSN 48239013. The main intended use is for Packing and wrapping paper which is also eco-friendly and expandable.
In the case of Khatema Fibres Limited v. State of Uttar Pradesh & Another, it was held that “if it can be established that the craft paper is mainly or only used for packing purposes and if in commercial parlance it is understood to be packing material, then the judgment delivered by the Full Bench of Allahabad High Court in the case of Lalji Board Industries does not come in the way of the appellant claiming and establishing that fact.
Shri Rajendra Kumar, Member (Central Tax) and Shri Vivek Arya, Member (State Tax) observed that the assessee have themselves declared their product to be “a packing material used for the packing of goods as a cushioning material, separators or edge protector to make shipping cartons of goods and as pallets and pallet boxes”
The Authority held that the eco-friendly expandable paper wrap (honeycomb paper for wrapping) merits to be classified under heading 48239013.
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