Govt brings Paper Industry under dual GST slabs of 5% and 18%, exempts exercise book paper; move expected to spur demand in packaging sector

Govt brings Paper Industry under dual GST slabs of 5% and 18%, exempts exercise book paper; move expected to spur demand in packaging sector

- Paper mills and converters could see higher capacity utilisation, improving margins despite recent cost pressures.
- Rising sales in FMCG, automobiles and electronics will trigger demand for both primary and secondary packaging, benefitting paper, board, and corrugated segments.

The Pulp and Paper Times

The GST Council, in its 56th meeting chaired by Finance Minister Nirmala Sitharaman, has approved a major overhaul of the Goods and Services Tax (GST) regime, effective from September 22, the first day of Navaratri. The GST Council inter-alia made the recommendations relating to changes in GST tax rates, provide relief to individuals, common man, aspirational middle class and measures for facilitation of trade in GST

Paper Industry: New GST Slabs in Focus

The paper industry, which previously had different tax rates, will now largely fall under the 5% and 18% slabs. This simplification is expected to bring greater clarity and ease of business for manufacturers and consumers alike.

As part of the GST rationalisation, an official government release detailed specific changes in rates across paper-products categories—all designed to streamline tax rates and reduce compliance burden.

• 12% to 0%
-Uncoated paper and paperboard used for exercise book, graph book, laboratory notebook and notebooks
-Exercise book, graph book, & laboratory note book and notebooks under 4820

•  12% → 18%
- Composite paper and paperboard (non–surface coated), including rolls or sheets 
- Corrugated, creped, embossed, or perforated paper and paperboard 
- Coated paper and paperboard (e.g., kaolin-coated), printed or plain 
- Uncoated paper and paperboard, of a kind used for writing, printing or other graphic purposes, and non-perforated punch-cards and punch tape paper, in rolls or rectangular (including square) sheets, of any size, other than paper of heading 4801 or 4803; [other than Uncoated paper and paperboard for exercise book, graph book, laboratory notebook and notebooks]
- Uncoated kraft paper and paperboard, in rolls or sheets, other than that of heading 4802 or 4803
- Greaseproof papers and Glassine papers

•  Tax reductions to 5%

- Paper sacks and biodegradable bags, previously at 18%, now reduced to 5% 
- Boxes, cartons, cases of paper or paperboard (both corrugated & non-corrugated) — cut from 12% to 5% 
- Pulps of fibres derived from recovered (waste and scrap) paper or paperboard or of other fibrous cellulosic material
- Hand-made paper and paperboard
- Boxes, pouches, wallets and writing compendiums, of paper or paperboard, containing an assortment of paper stationery
- Wood pulp obtained by a combination of mechanical and chemical pulping processes ( 4705)

-  18% to 5%
- Paper Sacks/Bags and bio degradable bags

Uncoated paper and paperboard used in exercise books and notebooks, as well as the notebooks including graph books and lab notebooks are now exempt. Printed maps, atlases, wall maps, topographical plans, and globes have also been brought under the nil tax category.

Implications & Industry Outlook

• Cost Efficiency for Manufacturers : Many paper-intensive goods—especially packaging and industrial-grade variants—now attract a lower GST rate, reducing overall cost structures and potentially improving competitiveness.
• Differential Treatment Based on Product Finish: Products like coated or decorative paperboard, which were already priced higher, now face an 18% rate, preserving tax parity with similar premium-category goods.
• Strategic Realignment for Businesses: Paper manufacturers and converters must reassess pricing, input sourcing, and inventory decisions ahead of the September 22 transition.
• Broader Economic Impact: This rationalisation is aimed at boosting consumption and simplifying compliance, aligning with the government’s strategy to enhance economic liquidity and stimulate demand

Demand Flow for Packaging

The government’s decision to rationalise GST rates into 5% and 18% across sectors such as FMCG, healthcare, electronics, and automobiles is expected to significantly boost consumer demand. With lower taxation, product affordability will rise, encouraging higher sales volumes. This growth will have a direct spillover effect on the packaging industry, as increased consumption translates into greater need for cartons, boxes, and other paper-based packaging. Packaging paper, being an essential component across all product categories, will see strong demand momentum. Overall, the move not only supports end-consumer markets but also strengthens the value chain of the paper and packaging industry.

Final Thoughts

This imminent GST restructuring marks a defining moment for the paper industry. While most paper products benefit from lower tax rates—boosting affordability and efficiency—manufacturers dealing with coated and specialty paper must plan for a relatively higher rate under the 18% slab. The overarching goal: simplified taxation, better compliance, and enhanced consumption, all while preserving fairness across product segments.

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