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Tags are used for items that need to be labeled, categorized, or organized using keywords that describe them.

Multiple or single Tags can be used to categorize items. Use short labels for easy scanning. Use two words only if necessary to describe the status and differentiate it from other tags.

When to use

Use tags when content is mapped to multiple categories, and the user needs a way to differentiate between them.
Tags can also be used as a method of filtering data, to show only items within that particular category.

When not to use

Don’t use as a button or link
Do not overload the Tag with too much content. It is designed for brief labels or categorizations.

References

Source
Storybook