5% GST on Compostable Packaging: A Win for Businesses, Consumers and Nature

The GST Council's decisive recommendation to move certain biodegradable and compostable bags, along with eco-friendly packaging, from the 18% to the 5% tax bracket represents a bold step toward sustainability. This influential policy, discussed at the Council meeting on 3rd September 2025 and scheduled for roll-out on 22nd September 2025, is set to make certified compostable options significantly more affordable. It signals the government’s firm commitment to green policy goals, making real change for the environment and economy.

What changed

• In its 56th meeting, the GST Council’s forward-looking recommendation places qualifying biodegradable and compostable packaging in the favourable 5% GST slab, down from 18%. This change demonstrates clear, practical support for sustainability in India’s packaging landscape.

• The Council recommended effective dates for implementation; most goods-rate changes were to be put into effect from 22 September 2025.

  
  

Why this matters

The government presents this change as part of a “green” focus in GST rationalisation: to lower the price barrier for sustainable products, support domestic green manufacturing and MSMEs, and align fiscal policy with environmental objectives. These are the stated aims as outlined in official press materials.

Who stands to benefit

• Businesses and brands: Lower tax on qualifying compostable products reduces the tax component of purchase costs, making it easier for companies to consider switching packaging across SKUs and fulfilment.

• MSMEs and startups: Many producers of compostable films and bags are small firms; lower GST is intended to improve competitiveness and market access.

• Consumers: When retailers pass on the tax change, compostable options become closer in price to plastic alternatives, making greener choices more accessible.

  
  

How this fits with India’s plastic rules

India has regulations and notifications aimed at reducing single-use plastics (including the Plastic Waste Management Rules and related bans). The GST change is presented as complementary: while rules restrict certain plastics, tax policy is being used to encourage alternatives.

What is included, and what to check

The Council text refers to “biodegradable bags” and similar items being placed in the lower tax slab. For practical use, businesses should confirm:

1. Tariff classification: Verify whether your specific SKU maps to the tariff entries listed in the GST Council recommendations.

2. Certifications: Check for recognised compostability or biodegradability certificates and test reports (industrial compostability standards where relevant). Only properly certified products should be treated as qualifying for the lower rate.

3. Local composting capacity: Compostable packaging delivers environmental benefit only if there is a route to composting (industrial or municipal). Map end-of-life options before switching large volumes.

4. Tax advice: Confirm implementation timing and transitional rules with a tax or procurement advisor before making major purchases.

   
   

What this change does and does not guarantee

• It does: Reduce the GST rate on qualifying items (as recommended), and signal policy support for greener alternatives.

• It does not automatically: Guarantee specific environmental outcomes (e.g., a measured drop in plastic leakage). Actual results depend on certification clarity, supplier capacity, buyer behaviour, pricing decisions, and waste-management infrastructure.

  
  

How we fit in the practical next steps for customers

For five years, Bambrew has led with practical, certified sustainable packaging solutions tailored for real-world needs. Our commitment to innovation and compliance ensures businesses have trusted, eco-friendly alternatives that address both operational requirements and regulatory standards. We welcome the GST Council’s move to reduce GST on certain biodegradable/compostable bags from 18% to 5%. This fiscal change makes switching from conventional plastics more viable, supports domestic suppliers and MSMEs, and reaffirms Bambrew’s unique position in advancing affordable, certified green solutions.