Impact of GST on Paper: Paper Industry Welcomes GST Bill, but Apprehensive about Tax ‘Slabs

Paper Industry Welcomes GST Bill, but Apprehensive about Tax ‘Slabs

New Delhi, 05 AUG 2016: The concept of ‘One Nation and One Tax’ is a step closer to be a realty soon. The long awaited Good and Service Tax (GST) bill is expected to be implemented by 1st April 2017. Bill to amend the Constitution was approved by the Rajya Sabha, paving the way for the Goods and Services tax (GST). Indian Pulp and Paper Industry has welcomed the GST regime but keeping the finger cross about what would be the tax slab for paper industry. Last year, a committee headed by chief economic adviser Arvind Subramanian had recommended the standard GST rate at 17- 18% and RNR (revenue neutral rate) was put at 15-15.5%. The committee had pegged it at 15-15.5% with a preference for the lower number. Based on this it recommended the following three slabs: However today FMCG companies pay nearly 24-25% including excise duty, VAT and entry tax. GST at 17-19% could yield significant reduction in taxes. It means last consumer would be enjoying cheaper FMCG products that will surely bring boost to packaging paper and other food grade paper demand. By turning India into a common market and unifying a plethora of levies, the government estimates that GST will radically transform the $2 trillion economy. The Centre seemed to concede that the rate at which the new indirect tax will be levied on most goods is likely to be higher than 18 per cent. According to the expert that logistic cost of the companies would be on lower side as they are expected to save 30-40 % on the elimination of inter-state taxes. Revenue Secretary Mr. Hasmukh Adhia told in a press conference that it would be “premature” to expect the standard GST rate to be 18 per cent, much lower than the combined excise duty and value-added tax. GST is going to benefit Paper Industry through reduction in Tax rate on Capital Goods procurement. New GST bill could fall capital goods prices by 12-14 % helping the industry in expansion plan in lower capital cost certainly the finished product would have lower cost of production consequently.

In May, the Cabinet has also approved a first ever national capital goods policy that seeks to reduce reliance on imported equipment by incentivising domestic production and in the process creating crores of jobs The policy seeks to increase production of capital goods from Rs 2.3 lakh crore in 2014-15 to Rs 7.5 lakh crore in 2025 and also raise direct and indirect employment from the current 84 lakh to three crore. It also aims to increase exports from the current 27% to 40% of production by providing an enabling environment for the industry which will include a long-term and stable duty structure that will encourage domestic manufacturing.

Industry speaks:

Mr. Pawan Agarwal, Joint Managing Director of Naini Papers Limited

Mr. Pawan Agarwal, Joint Managing Director of Naini Papers Limited said “Immediately we feel it should good for the Pulp and paper industry because multiple taxes would be avoided. There are certain entry taxes in states like UP, definitely entry tax is a main hurdle today and GST entry tax would be abolished. Certain benefits are being given to paper industry like normal excise rate is 12% where as to paper industry it is 6%. Now we have to see how government incorporate this benefit in GST also. The Paper Mills in states like Uttrakhand, Jammu and Kashmir and Himachal Pradesh are enjoying certain excise exemption. Will they be getting the exemption or not after GST, are the major concerns.”

Executive Director of Pudumjee Pulp and Paper Mills, Dr. Ashok Kumar

Executive Director of Pudumjee Pulp and Paper Mills, Dr. Ashok Kumar said “Paper industry is an organised sector and it is going to be benefitted by GST. If you want to do a business in a responsible manner then GST is going to help everybody. The only thing we have to see what is the total GST as tax % that we are going to pay. Whatever we are going to pay today everything put together, if GST is more than that then Industry can’t take that load. On the question of higher Tax rate slab Mr. Choudhary describes that “there is no much of leverage particularly when paper is coming from outside. You can’t increase the prices today but suppose something happens everybody increase the prices what you do? You like to pass on the customer.”

Mr. Anil Kumar CEO and Executive Director of Shreyans Industries Limited

Mr. Anil Kumar CEO and Executive Director of Shreyans Industries Limited said “Today Paper is considered to be a ‘merit’ good in current taxation regime and normal duty is 6%. Normal VAT rate in states is 13.5% but paper industry pays upto 6 %. We have had discussion with Government time to time over GST and pre budget meeting for last 6-7 years, the message has been conveyed to them and they have acknowledged it that yes paper is a ‘Merit’ good. Government is going to announce 2-3 slabs of taxation under GST.  We are hoping that paper should come in lower rate ‘slabs’ not upper slab that attracts 18% taxation. So till the announcement of Tax rates we are keeping our finger cross, if Centre takes Paper as a ‘Merit’ good then will decide that what is our existing taxation pattern and what tax rate come?” He further said if we come under 18% tax slab then Paper industry will suffer significant  additional Tax burden and product will be expensive to the last ‘consumer’ but our ‘intermediate’ customer would get immune. GST regime is beneficial as principal and in Paper industry value chain breaks at many points but uniform GST will make trading easier across India.”

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