GST Hike Poses Crisis for Indian Paper Industry

The Indian paper industry is facing a potential crisis following the government's decision to increase the GST on paper and paperboard from 12% to 18%. This change, according to the Indian Paper Manufacturers Association, threatens to raise consumer prices and place a significant financial burden on Micro, Small and Medium enterprises (MSMEs).

Paper is a fundamental element of education and eco-friendly packaging. With the increased GST rate, the sector expected to benefit from a reduced tax bracket finds itself bracing for economic challenges. The hike contrasts with the reduction in GST on paper containers, creating an inverted duty structure that could immobilize significant working capital for MSMEs.

IPMA President Pawan Agarwal has urged the government to reevaluate this policy, stressing that it contradicts Prime Minister's stance on maintaining lower tax rates for essential goods. Agarwal cautions that over Rs 500 crore in working capital may be locked, leading to operational disruptions for small businesses.