AAR explains GST Rate applicable on Non Woven Bags

In re Max Non Woven Pvt. Ltd (GST AAR Gujarat)

Q.1 Whether the product Non Woven Bags manufactured through the intermediate product Non Woven fabric classifiable under Heading No. 5603 are properly classifiable under Heading No. 6305 or under Heading No. 3923?

Ans. The product Non Woven Bags manufactured through the intermediate product Non Woven plastic material manufactured from Fibre grade poly propylene granules merit classification under Heading No. 3923.

The rates of GST applicable on said products during different periods, as discussed herein above, are as below:

Q.2. Whether the product Non Woven Bags would be eligible for exemption under Notification No. 01/2017-CT (Rate) and 01/2017-I.T. (Rate) dated 28.06.2017 as amended?

Ans. Negative in view of the above discussion.

FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING,GUJARAT

M/s. Max Non Woven Pvt. Ltd., C type 119,120,121, Golden Industrial Estate, Behind Shapar Village, Shapar, Veraval, Gujarat having a GSTIN : 24AAHCM4709L1ZA, is a company filed an application for Advance Ruling under Section 97 of CGST Act, 2017 and Section 97 of the GGST Act, 2017 in FORM GST ARA-01 discharging the fee of Rs. 5,000/- each under the CGST Act and the GGST Act. 1440

2. M/s. Max Non Woven Pvt. Ltd an applicant is engaged in the manufacture of Non woven Bags through the intermediate product Non Woven Fabrics manufactured from Fibre grade poly propylene granules by adopting the Spun Bond technology. In this technology polypropylene granules are fed to the hopper and passed through extruder at certain temperature. The melted material after filtering passed through the spinning unit to obtain a continuous single filament. The said filaments are then subject to lying on continuous web and under control pressure thermal bonding. The resultant product is non Woven fabrics which is called Polypropylene Non Woven Fabric.

3. The applicant submitted that prior to introduction of Goods and Service Tax Act, the Polypropylene Non Woven Bags were being classified under heading No. 6305 being product manufactured through Non woven fabric classifiable under Heading No. 5603.

4. The applicant further submitted that prior to introduction of Goods and Service Tax Act, the classification of Polypropylene Non Woven bags was in question before the authority under Section 94 of the Kerala Value Added Tax Act, 2003 in the case of M/s. Malabar Treads, Manjeri. The authority after considering the Heading No. 5603 as appearing in the Schedule to the Central Excise Tariff concluded that the said product would appropriately be classifiable under HSN code 6305.33.00 of the Custom Tariff Act which correspondence to entry No. 174 (7) (1) of List A of the third Schedule to the KVAT Act, 2003.

5. The applicant submitted that the after the introduction of GST Act, 2017 one of the manufacturer M/s. Karam Green Bags had approached DKTE Centre of Excellence in Non Wovens (Govt. Department) and the Director of the said organization has clarified that the Polypropylene Non Woven fabrics are classifiable under Heading No. 5603 and these Polypropylene Non Woven Fabrics are basically textile materials and not plastics.

6. The applicant further submitted that Madurai District Non Woven bag and Cotton Bag Manufacturer Association had approached the Commissioner of Central GST and Central Excise, Madurai vide letter dated 22.12.2017 and had requested to clarify the classification of Non Woven Bags etc. The Office of the Commissioner vide letter dated 01.01.2018 issued from F. No.IV/16/84/2017-Tech (GST) has clarified that Non Woven bags are classifiable under Heading No. 63059000 and are eligible for exemption under Notification No. 01/2017-CT (Rate)

7. The applicant submitted that one of the manufacturer M/s. U.S Polytech of Howrah had also approached the Hon’ble Advance Ruling Authority for classification of Polypropylene Non Woven Bags; the said authority was of the view that the said product is classifiable under Heading No. 39.23. However, on appeal to the Appellate Authority for Advance Ruling, the Appellate Authority have reversed the said order and settled the law that the Polypropylene Non Woven Bags would appropriately be classifiable under Heading No. 6305 and the Advance Ruling Authority had erred in holding that PP Non woven Bags were classifiable under Heading No. 39.23.

8. The applicant further submitted that the Tax Research Unit (TRU), Department of Revenue, New Delhi vide Circular No. 80/54/2018-GST issued clarification regarding GST rates and classification, wherein one of the product was Polypropylene Woven and Non Woven bags and PP Woven and Non Woven bags laminated with BOPP. The learned authority after considering the meaning of the word ‘Plastic’ came to the conclusion that the product would be classifiable under HS Code 3923 and would attract 18% GST.

9. Accordingly, the applicant sought the Advance Ruling on the following question :

1. Whether the product Non Woven Bags manufactured through the intermediate product Non Woven fabric classifiable under Heading No. 5603 are properly classifiable under Heading no. 6305 or under Heading No. 3923?

2. Whether the product Non Woven Bags would be eligible for exemption under Notification No. 01/2017-CT (Rate) and 01/2017-I.T. (Rate) dated 28.06.2017 as amended?

Applicant’s interpretation of law and/or facts

10. The applicant submitted that the Polypropylene Non Woven Bags are being manufactured out of Non Woven fabrics which are admittedly classifiable under heading No. 5603i.e. as Textile Article and therefore the product manufactured out of the said material will have to considered as textile article and classifiable under Heading No. 63.05.

11. The applicant submitted that in view of Rules of interpretation Heading No. 6305.3300 being specific heading would prevail over the general Heading of 3923.

12. The applicant submitted that the Hon’ble Advance Ruling Authority as referred herein above as also the Hon’ble Appellate Advance Ruling Authority have settled the law and have confirmed the classification of Polypropylene Non Woven Bags under heading No. 6305.33.00 and therefore the same would be binding. The decision of Hon’ble Appellate Authority for Advance Ruling is of 13.05.2019, i.e after the clarification issued by TRU section of Ministry of Finance and therefore the same would be prevail over the clarification.

13. The Applicant submitted that the Director of DKTE Center of Excellence in Non Woven have also clarified beyond doubt that the Polypropylene Non Woven Fabric is textile material and not plastic and therefore the product manufactured out of such material could never be classified as plastic material.

14. The applicant further submitted that the same issue had come up before the Hon’ble Supreme Court of India in the case of Porrits and Spencers (Asia) Limited V/s. State of Haryana reported in 1983 (13) ELT 1607. The Hon’ble Supreme Court of India after considering the relevant facts has settled the law that the word “Textile” would also cover the fabric manufactured through any material.

Personal Hearing

15. Personal hearing in the matter was held on 06-08-2020. Authorised representative of the company appeared on behalf of the applicant and reiterated the submission made in the Application.

DISCUSSION & FINDINGS

16. We have considered the submissions made by the applicant in their application for advance ruling as well as the arguments/discussions made by their representative. We have also considered the issues involved on which Advance Ruling is sought by the applicant.

17. At the outset, we would like to state that the provisions of both the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017 are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the GGST Act.

18. We observe that the applicant is engaged in manufacturing of Non woven Bags through the intermediate product Non Woven Fabrics manufactured from Fibre grade poly propylene granules by adopting the Spun Bond technology. In this technology, polypropylene granules are fed to the hopper and passed through extruder at certain temperature. The melted material after filtering passes through the spinning unit to obtain a continuous single filament. The said filaments are then subject to lying on continuous web and under control pressure thermal bonding. The resultant product is non Woven fabrics, which is called Polypropylene Non Woven Fabric. The issue for decision before us is the classification i.e. HSN code and appropriate Rate of Tax for Nonwoven Polypropylene Bags manufactured by the applicant.

19. We first discuss the appropriate classification of the goods viz. Non Woven Polypropylene Bag. The applicant claims that their product is classifiable under CTH 6305. The relevant chapter Note, headings, HSN Explanatory Notes are examined as under: