Biodegradable Bags Eligible for 5% GST; Biodegradability to be Determined by Environmental Authorities: AAR [Read Order]

The Authority for Advance Ruling ruled that the manufacture of biodegradable bags attracts only 5% GST but the determination is with the jurisdiction of the environmental authorities.

The applicant, Sunita Kohli, raised a question regarding the classification of goods and/or services or both as the proprietorship concern of the applicant was into manufacturing and selling of packing material, one of the major portions pertained to biodegradable bags. The applicant submitted that biodegradable bags whether of plastic origin or paper origin are specifically covered at 5% GST from 22.09.2025.

The applicant supported this by a test certificate from CIPET (Centre for Skilling and Technical Support -CSTS), Department of Chemicals and Petrochemicals, Ministry of Chemicals and Fertilizers, Government of India. It was also argued that the heading linkage to both Chapters 39 and 48 demonstrates the Legislature’s intent to cover biodegradable variants made from plastic, compostable polymer, or paper base.

AAR observed that mere submission of such a certificate does not authorize the Authority to make any scientific, technical or environmental determination regarding the actual biodegradability or compostability of the product. It was also observed that Entry No. 319 of Schedule 1 to Notification No. 9/2025-Central Tax (Rate) provides a concessional GST rate of 5% under Chapters 39 and 48.

AAR held that they cannot determine whether the appellant’s product is biodegradable or compostable and further held that if the product is not biodegradable then the concessional rate would not apply. The bench of Utkarsha (Central Tax Member) and Dr. Akhdean Charan (State Tax Member) passed the abovementioned ruling.

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