The Gujarat Authority for Advance Ruling (AAR) has determined that biodegradable and compostable bags manufactured by Greenomers Private Limited are subject to a concessional Goods and Services Tax (GST) rate of 5%. This concession applies, provided that the company’s assertion regarding the products being biodegradable is validated.
The two-member Authority, consisting of SGST Member Sushma Vora and CGST Member Vishal Malani, noted that the government rolled out this concessional rate to promote the production of biodegradable bags as an eco-friendly alternative to traditional plastic bags.
“The very purpose of the Government in inserting this entry appears to be to promote the production of paper sacks/bags and biodegradable bags which are eco-friendly and environmentally friendly,” the Authority stated.
Greenomers manufactures biodegradable and compostable bags utilised for packaging, carrying and storing goods. As per the company, the bags are made from materials such as polylactic acid (PLA), starch-based polymers, polybutylene adipate terephthalate (PBAT), calcium carbonate and additives.
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The company stated that these bags are manufactured through a controlled blending and film-forming process and are designed to decompose under industrial or home composting conditions.
The authority did not accept the proposed classification of the company under HSN 39079990. An examination of Chapter 39 of the Customs Tariff Act, 1975, revealed that Heading 3907 covers certain plastic raw materials in their primary form, whereas finished bags do not specifically fall under Headings 3915 through 3925.
Therefore, Heading 3926, which covers other articles of plastics, was the correct classification. The authority said that the bags come under subheading 39269099.
The Authority reviewed Notification No. 09/2025-Central Tax (Rate), dated September 17, 2025, regarding the applicable GST rate. Entry 319 of Schedule I pertains to paper sacks, bags, and biodegradable bags classified under Chapters 39 and 48. These items are subject to a GST rate of 5%. In contrast, Entry 127 of Schedule II covers other plastic articles classified under Heading 3926 and is subject to a GST rate of 18%.
The authority analysed discussions at the 54th GST Council meeting conducted on September 9, 2024, to comprehend the background of introducing the concessional entry. In the meeting, the Maharashtra representative sought to promote paper bags as an alternative to plastic bags. The representative of Meghalaya had shown the usage of starch-based biodegradable bags and requested their inclusion in the proposal.
The Authority said that the inclusion of Chapter 39 in Entry 319 appears to be aimed at promoting the production of biodegradable plastic bags.
Greenomers supported its claim, submitting a certificate issued by TÜV Rheinland, Germany, dated May 26, 2026, along with an analysis report from the Institute of Petrochemicals Technology in Chennai regarding a sample of compostable film.
The company also provided documents from the Gujarat Pollution Control Board and proof of its application to the Central Pollution Control Board for the necessary certification. The CPCB certificate is still pending.
The Authority determined that the bags fell under Entry 319 of Schedule I and were subject to a GST of 5% (comprising 2.5% CGST and 2.5% SGST). However, this benefit was made conditional on the validity of the company’s claim that the bags are biodegradable.
| Applicant Name | M/s. Greenomers Private Limited |
| GSTIN of the applicant | 24AAGCE4587K1Z9 |
| Present for the Applicant | Shri Maheshkumar K. Patel |
| Gujarat GST AAR | Read Order |
