GST 2.0 Reforms – Boon or Bane for the Paper Industry? Emerging Imbalance in Uncoated Paper Trade

GST 2.0 Reforms – Boon or Bane for the Paper Industry? Emerging Imbalance in Uncoated Paper Trade

- Paper Industry at the Crossroads: Impact of GST 2.0 on Uncoated Paper Trade
- Educational Book Publishers have advanced their seasonal procurement of paper to ensure dispatches are completed before 22nd September
- Converters are denied ITC credits on inputs, raising overall costs of investment and production.

The article below is written by Mr. Ashish Bandi, Director of Jayant Marketing Pvt Ltd in Indore, a company with a legacy in paper trading since 1968. The views are personal.

The Pulp and Paper Times

The recently announced GST 2.0 reforms, aimed at enhancing the ease of doing business, have been welcomed for their focus on reducing tax slabs and making daily-use consumer goods more affordable. Simplification in new registration and faster refunds are positive steps that will certainly encourage startups and ease working capital requirements for MSMEs.

However, when it comes to the pulp and paper industry and its allied sectors, the reforms have raised serious concerns that require urgent clarification from the GST Council.

Dual GST Rate on Uncoated Paper (HSN Code 4802)

A key issue lies in the proposed dual tax structure for uncoated paper. If used for notebooks, exercise books, graph books, or laboratory books, the GST will be NIL. For all other purposes, such as printing, stationery, diaries etc the rate is set at 18%.

This classification, based on end use at the point of sale, has left both manufacturers and traders perplexed—since determining the ultimate usage of paper at the time of sale is practically impossible. Clear guidelines are urgently needed.

The absence of a structured mechanism to ascertain end use at the point of sale is making compliance and invoicing ambiguous.

A single tax rate on HSN 4802 would have eliminated this disparity, ensuring clarity of Invoicing for Paper manufacturers and Traders..

Notebook – Intentions Achieved or Defeated?

The NIL GST rate on notebooks has inadvertently created further complications. Converters are denied ITC credits on inputs, raising overall costs of investment and production. Similarly, paper manufacturers and traders supplying uncoated paper to notebook makers at NIL GST must proportionately reverse their own ITC, effectively inflating costs by approx 6%.

The very objective of making notebooks more affordable for students is, therefore, undermined. The industry is also grappling with the absence of a structured mechanism to ascertain end use at the point of sale, making compliance and invoicing ambiguous.. A lower but positive GST rate on Notebooks—say 0% or 5%—would have been a more practical solution, ensuring ITC availability thus keeping notebooks affordable.

Education Sector

Educational textbooks have been kept under NIL GST since the inception of GST to ensure affordability and accessibility of learning materials. However, the recent increase in GST on paper from 12% to 18% directly impacts the cost structure of publishers who manufacture these textbooks. Since they cannot claim credit on input tax, the tax paid on paper becomes an embedded cost.

As a result, the cost of educational textbooks is expected to rise by around 6%, placing an additional financial burden on students and parents. This outcome runs contrary to the Government’s larger objective of making education affordable and accessible to all.

Inverted Duty Structure – Burden on Converters

Another challenge arises from the inverted duty structure. Inputs such as paper, kraft paper, and paperboard attract 18% GST, while finished products like corrugated boxes, paper pouches, paper bags, and monocartons are taxed at 5%.

Though the revamped refund process promises 90% reimbursement within 7 days and the balance 10% within 60 days, stakeholders remain concerned. ITC refunds are restricted only to raw materials—not capital goods or services. Given the substantial capital investments in this sector, the inability to claim ITC on machinery and infrastructure adds to the financial strain.

Disadvantaged Position of Paper in the GST Framework

A paradox in the GST structure has created an unintended anomaly within the paper industry’s value chain. The GST on raw material (pulp) has been reduced from 12% to 5%, and finished products such as boxes, pouches, and bags have similarly been reduced from 12% to 5%. In contrast, the GST on paper has been increased from 12% to 18%. This divergence places paper itself at a structural disadvantage in its own value chain, warranting reconsideration to ensure parity and fairness across the sector.

Uncoated Paper Trade (HSN 4802) – Emerging Imbalance Post GST Reform

The trade of Uncoated Paper (HSN 4802) is witnessing severe disruption following the GST reform announcement dated 3rd September 2025.

●Educational Book Publishers have advanced their seasonal procurement of paper to ensure dispatches are completed before 22nd September, as the GST hike from 12% to 18% would otherwise inflate their costs by an additional 6%, making textbooks more expensive.

● In contrast, Notebook Manufacturers, caught in a state of regulatory confusion, have directed suppliers to withhold dispatches. This is because they will be required to reverse the Input Tax Credit (ITC) availed up to 21st September, which in effect increases their effective paper cost by nearly 12%.

This dual pressure—preponed demand on one side and supply standstill on the other—has created a drastic imbalance in the paper trade ecosystem, adversely affecting the entire value chain.

The reforms under GST 2.0 are undoubtedly progressive in many respects, but for the paper industry, they bring confusion, contradictions, and unintended cost escalations. Unless clarifications are issued and anomalies corrected, the sector risks being handicapped rather than empowered under the new regime.

A uniform GST rate for uncoated paper (HSN 4802), ITC-enabled lower rates for notebooks, and parity in the value chain would restore balance and align with the Government’s vision of affordability, simplicity, and growth.

About the Company
Ashish Bandi is the Director of Jayant Marketing Pvt Ltd in Indore, a company that has ventured in a legacy of paper trading since 1968. The third-generation members of the family-run business have preserved the core values that have guided the company for decades while also driving its growth through a forward-thinking, systematic approach. Their enthusiasm and strategic vision have led to the expansion of the company’s portfolio from traditional writing and printing paper to new ventures in Tissue and Packaging Board. The company has state of the art warehousing facilities which resulted in effective inventory management. Jayant Marketing Pvt Ltd has made a significant stride with the establishment of its branch in Bhopal and attracted a fresh customer base. The effective system driven approach and expanding reach resulted in significant increase of its top line, reflecting a commitment to innovation and growth.
 

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