Govt unlikely to reconsider GST rate structure on paper sector; Finance Ministry says no risk of ITC blockage

Govt unlikely to reconsider GST rate structure on paper sector; Finance Ministry says no risk of ITC blockage

The Pulp and Paper Times

New Delhi: The paper industry faces a setback as the government has not offered any relief on GST, leading to growing dissatisfaction across the sector. With paper prices already elevated, the industry fears that the tax burden is likely to increase further 

According to CNBC Awaaz sources, the Finance Ministry is not considering any change in the recently revised GST rate structure for the paper value chain, despite strong objections raised by the domestic paper manufacturing industry.

Recently, the GST Council had reduced GST on exercise notebooks, notebooks and other educational printed materials from 12% to NIL — a move that was widely appreciated by the public and consumer groups.

However, paper manufacturers and industry associations strongly opposed the decision. Their concern is that while finished educational notebooks have been made NIL, the GST on raw materials such as uncoated paper and paperboards has been increased from 12% to 18%. Manufacturers argue this will block input tax credit (ITC), raise working capital pressure, push up notebook prices and may trigger a surge in imports, hurting domestic production and “Make in India”.

Industry representatives escalated the issue to the Finance Ministry and even the Prime Minister’s Office, requesting that all types of paper be brought under a uniform 5% GST slab.

But sources tell CNBC that the government has completed multiple rounds of discussions at different levels — including Finance Ministry Committee and senior policy leadership — and has concluded there is no need for any change at this stage.

The Finance Ministry has conveyed to industry that there is no risk of ITC blockage because raw material suppliers are traceable and fully compliant under GST systems. The mechanism is transparent, and automatic refund provisions are already in place. Officials have also clarified that there is no evidence that notebook prices will rise because of the new structure. In addition, government agencies are monitoring imports closely and will intervene if required.

In summary, the industry’s demand for a uniform 5% GST rate across the paper sector is unlikely to be accepted for now. The existing GST structure will continue, and the government believes concerns regarding ITC blockage, price increase and import surge are overstated.

Sources: CNBC Awaaz
 

Web Title: Govt unlikely to reconsider GST rate structure on paper sector; Finance Ministry says no risk of ITC blockage