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FCBM: Enhanced GST on boxes will lead to increase in working capital requirements

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The Federation of Corrugated Box Manufacturers (FCBM) of India's reaction on GST increase

FCBM: Enhanced GST on boxes will lead to increase in working capital requirements

29th September 2021 | The Pulp and Paper Times:

Recently The Pulp and Paper Times interacts with the President of The Federation of Corrugated Box Manufacturers (FCBM) of India, the apex body of India’s corrugated packaging industry with a membership of over 2000 corrugated box manufacturers. Mr. Milan Kumar Dey shares his concern over the GST rate increase. Here is a small interaction with him:

Q: How would this increase of GST rate impact all stakeholders of the paper industry in long term? 

The proposed increase in rate of GST on boxes from 12 to 18% with the rate of Kraft Paper & Board remaining at 12% will lead to increase in working capital requirements of each member unit. The MSME member units are required to extend credit to the B2B customers for 3 months as per industry average. The additional working capital costs will erode the wafer-thin margins, putting the very survival of the industry at stake.

Q: Corrugators and Printers will be affected most by this decision, is your association will oppose to this? what will be your stand? 

We have written to concerned ministries highlighting the perils of this irrational decision.

Q: Will this increase in rate impact paper demand in terms of volume?

Corrugated packaging plays a very vital role in packaging of fruits, vegetables and horticulture produce. Even in present circumstances the adoption of proper packaging is very poor in India compared to global standards due to packaging costs and lack of awareness. Corrugated Packaging is a vital tool to save wastages and handling losses in the harvest to retail chain. This burden of additional GST will further deter farmers and agriculturists aggravating the situation.

Q: Are the converting & paper industry ready to absorb this burden of the extra rate of TAX? in view of the post-COVID situation 

Corrugated Packaging manufacturers are grappling with volatility in raw material prices and any additional cost burden will break the back of the industry.

Q: Don't your association think that this decision of GST council will hit most to the replacement drive of single-use plastic? 

The nascent drive and awareness to switch to eco-friendly and environment-friendly paper-based products as replacement for single-use plastic will be dealt a debilitating blow with this increase in GST.

 

Q: Any other important comments

Bulk of the supply of Boxes are majorly to B2B industries, which would be availing credit of the proposed 18% GST chargeable, there is no additional revenue generation to the exchequer, however, this step will negatively affect the bottom lines of the corrugated box manufacturing units.


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