Vat on recycling of newspaper and making paper bags

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 December 2012 Please let me know whether there is any taxation at the time of sale in the process of purchasing the old newspapers and magazines and then manufacturing paper bags from these raw materials.

Querist : Anonymous

Querist : Anonymous (Querist)

10 December 2012 Please experts let me know the solution of my query.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Here’s a breakdown on VAT regarding recycling newspapers into paper bags:

1. **Purchase of old newspapers/magazines:**
Generally, purchase of old newspapers, magazines, and scrap materials for recycling is either exempt or zero-rated under VAT in many states, as these are considered raw materials for further manufacturing.

2. **Manufacturing process:**
When you recycle these old papers and convert them into paper bags, it is treated as a manufacturing activity or works contract depending on the process and state VAT laws.

3. **Sale of paper bags:**
The sale of manufactured paper bags will attract VAT at the applicable rate on paper bags as per the state VAT schedule. Usually, paper products attract VAT around 5%–12.5%, but exact rates vary by state.

4. **Input VAT credit:**
If you are a registered dealer, you can typically claim input VAT credit on VAT paid on your inputs (old newspapers if taxable, chemicals, glue, etc.) against your output VAT liability on sale of paper bags.

### Summary:

* Buying old newspapers for recycling: Usually exempt or zero-rated.
* Manufacturing paper bags: Manufacturing activity.
* Selling paper bags: VAT applicable as per product classification.
* Input credit: Available if inputs are taxed and you are registered.

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If you tell me the state, I can help find exact VAT rates and exemptions applicable to paper bags and old newspapers in that jurisdiction. Would you like me to do that?

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