Paper industry warns of price rise for consumers due to GST hike

New Delhi, Sep 25 (PTI) The Indian paper industry has warned that the recent GST hike on paper and paperboard to 18 per cent will have a far-reaching adverse impact on consumers and MSMEs, leading to higher prices of paper products.

Calling the GST hike on paper from 12 per cent to 18 per cent a regressive step, the Indian Paper Manufacturers Association in a statement said that the increase will have widespread repercussions across education, packaging, MSMEs and consumers at large. “Paper is a necessity, not a luxury.

It is integral to education, literacy and eco-friendly packaging. We were expecting paper to be brought under the 5 per cent slab, but instead, it has been hiked to 18 per cent. This decision will have far-reaching adverse consequences,” IPMA President Pawan Agarwal said.

An increase in GST on the widely used input will create a cost-push across sectors and inevitably raise consumer prices. Paper is used in the packaging of essential goods, food items, pharmaceuticals, hygiene products and FMCG.

Pointing out an inverted duty structure, the IPMA said that the GST on boxes, cartons, sacks and bags made of paper has been reduced from 12 per cent to 5 per cent, the GST on the primary raw material—paper and paperboard—has been raised to 18 per cent.

With nearly 90 per cent of kraft and packaging paper used in cartons and boxes, such an inverted duty structure will block significant working capital, especially for MSMEs, which form the backbone of the packaging sector.

IPMA estimates that over Rs 500 crore of working capital will get locked up, forcing small businesses to grapple with recurring refund compliances and disrupting operations, Agarwal said.

Urging the government to reconsider the decision, Agarwal said, “The treatment given to the Paper Industry is in contradiction to the Prime Minister’s vision that only non-essential items would move from 12 per cent to 18per cent. We appeal for an urgent review to safeguard consumers, MSMEs and the long-term health of the Indian Paper Industry.” PTI RR MR MR