GST on Bags – Updated Rates, HSN Code & Guide

Key Takeaways:
 

1. GST on Bags ranges from 5% to 18% depending on the material used and the purpose of the bag.
    
2. Input Tax Credit (ITC) helps reduce the total tax payable if matched and claimed correctly.
    
3. Using fintech tools like Zoho, ClearTax, and Tally helps in billing, ITC, and return filing.
    
4. Missing return dates can lead to a ₹50 per day penalty, or even ITC denial and legal notice.

Bonus Point: Over 60% of small bag retailers in India still file GST manually, risking penalties despite free fintech tools that automate the entire GST process.

GST on bags refers to the Goods and Services Tax levied on various bag types based on material, usage, and HSN classification. It applies different tax rates like 5% or 18%, depending on whether the bag is eco-friendly, synthetic, leather, or used for travel.

Let’s understand it with the help of an example:

Let’s say Ramesh owns a shop in Jaipur that specialises in selling travel bags. In July 2025, he bought 100 synthetic bags at ₹500 each. He sold each bag for ₹700, collecting 18% GST on every sale. That means he paid ₹9,000 as GST when buying and collected ₹12,600 as GST from his customers. 

Since he used a fintech app to file GST, he claimed an input tax credit of ₹9,000 and paid only the remaining ₹3,600. This helped him stay compliant and avoid ₹50 per day penalties. Like Ramesh, small traders must be aware of the correct GST rates on bags to manage their tax returns effectively.

This blog explains the meaning of GST on Bags, GST rates for different bag types, how Input Tax Credit works, the latest rules, real-life penalties, and the use of fintech tools to avoid filing mistakes and save time.

The Goods and Services Tax (GST) on bags is not fixed. It depends on the type of bag, its usage, and the material used. Bags made from plastic or synthetic leather may attract a different GST rate compared to cotton or jute bags. The government assigns an HSN code to each type of product to fix its GST rate.

If a business sells different types of bags, it must correctly apply the HSN code and GST rate to avoid wrong tax filing.

Let’s understand it with the help of an example:

Let’s say Shalini owns a boutique in Pune that sells leather sling bags. In June 2025, she sold 50 bags priced at ₹1,000 each. She applied 18% GST and collected ₹9,000 from customers. If she had wrongly applied 5%, the tax collected would have been just ₹2,500, creating a loss of ₹6,500 and risk of a fine.

So, it’s important to know the right GST rate for each bag.

GST Rates on Bags Based on Bag Type

Different bags attract different GST rates depending on what they’re made of and their purpose. Correct classification helps you calculate the right tax and avoid penalties.

The table below shows GST rates for different types of bags based on HSN code, material, and usage.

GST Rates on Bags by Type and Use
 

As seen above, bags made from eco-friendly materials like cotton and jute enjoy lower GST rates, while synthetic or leather bags fall under the 18% slab.

Input Tax Credit (ITC) on Bags

Businesses that sell bags can reduce their GST payable using Input Tax Credit. ITC allows you to subtract the tax paid on purchases from the tax collected on sales. This helps in reducing the final tax burden.

For example, if you pay ₹9,000 GST when buying stock and collect ₹12,600 GST when selling, you only need to pay ₹3,600 to the government. This is only possible when you file returns properly and match invoices.

Below are some basic points explaining how ITC helps in the bag business and how fintech tools simplify the process.

1. Reduces Tax Payable:
   ITC allows sellers to deduct the GST paid on purchases from the GST collected on sales.
   Example: Ravi buys 200 bags at ₹400 each with 18% GST. He pays ₹14,400 as GST and collects ₹21,600 when he sells. Final tax = ₹7,200 only.
    
2. Improves Cash Flow:
   Since less GST is paid out of pocket, working capital remains free for stock or marketing.
    
3. Needs Accurate Filing:
   If GSTR-2B and GSTR-3B don’t match, ITC can be denied. Mistakes lead to rejection of claims.
    
4. Fintech Makes It Easy:
   Apps like Zoho, ClearTax, and TallyPrime auto-calculate ITC and alert you about mismatches.

So, ITC is not just a benefit, it's a necessity. With correct filing and fintech help, you can claim it on time and avoid loss.

GST Impact Based on Business Type

GST rules apply differently depending on the type of bag business. A retailer has different compliance needs compared to a manufacturer or wholesaler. Using the same GST rate but filing under the wrong category can result in heavy fines.

Here’s a table showing how GST compliance and risk change across different types of bag businesses.

GST Responsibilities by Business Type
 

As the table shows, manufacturers and regular dealers need more accurate tracking than others, and fintech tools reduce the burden of paperwork and late fees.

Recent Updates on GST on Bags

GST rates on bags have remained stable since 2022, but regular updates are announced by the GST Council. The rates differ mainly due to material and usage. In recent meetings, no new changes were announced for bags, but there’s growing demand from the industry to reduce rates on synthetic and school bags.

The government still encourages the use of eco-friendly materials like jute and cotton by keeping their GST rates lower at 5%.

Here is the latest update on GST rates on bags based on the most recent government announcements.

Latest GST Rates on Bags as of 2025
 

As of now, GST on bags hasn’t changed, but future meetings may address appeals from small traders and school bag manufacturers.

GST Return Calendar for Bag Sellers

Filing GST returns on time is just as important as collecting the right amount of tax. Bag sellers, whether they run a shop or an online store, must follow the monthly or quarterly return cycle based on their turnover.

If the deadline is missed, the government charges late fees, which may affect your GST score and ITC eligibility.

Here is the GST return calendar every bag seller should follow to avoid penalties.

GST Return Due Dates for Bag Sellers (2025)
 

Following this return schedule ensures smooth compliance, helps maintain ITC, and avoids late fines up to ₹5,000 per year.

Conclusion

GST on Bags is not the same for all bag types. The tax rate depends on the material, like leather, plastic, or jute and the purpose of the bag. Most synthetic and leather bags attract 18% GST, while cotton and jute bags enjoy a lower 5% rate.

Small businesses selling bags often make mistakes in tax calculation or delay return filings, which leads to penalties. That’s why using a good fintech tool is important. These tools help calculate the correct GST, claim input tax credit, file returns, and avoid mismatches.

By following the correct rates, staying updated on return dates, and using digital tools, bag sellers can run their business smoothly and remain GST compliant.

FAQs:
 

What is the GST rate for packing bags?

Plastic packing bags attract 18% GST, while paper packing bags are taxed at 12%, depending on their material type.
 

Are teabags GST-free in India?

Yes, plain tea leaves and teabags are generally GST-free as they are considered essential beverages under the exempted categories.

How can I avoid GST filing penalties as a bag seller?
Use fintech tools that remind you of due dates and help with error-free return filing.

Can I claim input tax credit on bags purchased for resale?
Yes, but only if your GST return filings are accurate and match with supplier invoices.

What happens if I wrongly apply 5% GST on a synthetic bag?
You may be fined up to ₹25,000 and have to pay the tax difference with interest.

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.