The Indian Paper Manufacturers Association (IPMA) has expressed concern over the recent GST rate changes on paper and paperboard, stating that the reduction in GST could disadvantage domestic producers while benefiting importers.
The association highlighted that the new GST slab, effective from Monday, reduces the tax on uncoated paper and paperboard (HS Code 4802) used for exercise books, notebooks and similar products to nil. While this is intended to reduce costs for consumers, IPMA warned that it may further intensify the competitive disadvantage faced by Indian manufacturers.
Calls for IGST on Paper Imports
IPMA President emphasized that foreign manufacturers exporting paper to India will not be subject to IGST, unlike domestic producers who must embed input taxes in their manufacturing costs. This could lead to a surge in imports, increasing pressure on the domestic industry.
"Given the GST cut on uncoated paper, imports will now face nil IGST. Domestic manufacturers, however, will still bear input taxes, putting them at a competitive disadvantage," the President said in a statement.
Impact on Pulp and Raw Material
The association also raised concerns about the reduction of GST on pulp from 12% to 5%, while the GST on wood, the main raw material for pulp production, remains at 18%. IPMA warned that this could drive higher pulp imports, adversely affecting the livelihoods of Indian farmers and leading to increased foreign exchange outflow.
Potential Cost Increase for Consumers
Contrary to expectations, the GST reduction may not reduce costs for consumers. Manufacturers will be ineligible for Input Tax Credit (ITC) on raw materials, inputs, services, and capital goods, forcing them to embed the GST into their product costs. This could result in higher prices for notebooks and exercise books.
"Exempting only the intermediate or final product breaks the ITC chain. Manufacturers will have to bear the taxes, leading to increased costs," IPMA added.
Memorandum to Government
IPMA has submitted a memorandum to Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman and Commerce Minister Piyush Goyal, urging the government to reconsider the GST structure and correct these anomalies. The association warned that without changes, existing and future investments in capacity expansion could be jeopardized.
The association further expressed concern about the increase in GST from 12% to 18% for certain paper and paperboard grades, which could negatively impact downstream industries and ultimately increase costs for consumers.
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