In a recent ruling by the Authority for Advance Rulings (AAR) in West Bengal, the tax implications surrounding disposable paper cups have been clarified. The AAR bench, comprising Tanisha Dutta and Joyjit Banik, determined that these ubiquitous cups would attract a goods and services tax (GST) rate of 18%.

The case unfolded as Sekandar Sardar, a manufacturer deeply entrenched in the business of producing paper cups, sought clarity on the GST levy applicable to his products. The crux of the matter lay in the composition of these cups, which are primarily crafted from paper but often fortified with a thin coating of plastic or wax to prevent liquid leakage.

The AAR looked closely at what the cups were made of. They found that while most of it is paper, about 5% is this inner layer of plastic (PE). Based on this, they decided that these cups should be classified under a category called Tariff item 4823, which attracts an 18% GST.