MSME-driven Corrugated sector seeks GST parity to avoid working capital stress; UP Paper Mills voice concern over GST hike

MSME-driven Corrugated sector seeks GST parity to avoid working capital stress; UP Paper Mills voice concern over GST hike

- Corrugated paper packaging industry welcomes gst cut on boxes, raises concerns on inverted duty structure
- Industry body raises concern over 18% gst on kraft paper, calls it a barrier to growth
- GST slab mismatch may hamper automation and export competitiveness, says ICCMA

The Pulp and Paper Times

The Indian Corrugated Case Manufacturers’ Association (ICCMA), representing the voice of over 7,000 semi-automatic units and 600 automatic plants across the country, has written to the Hon’ble Prime Minister seeking urgent intervention on the recent GST revisions impacting the corrugated packaging industry. While the sector has welcomed the government’s progressive move to reduce GST on corrugated boxes from 12% to 5%, it has raised serious concerns over the simultaneous hike in GST on its key raw material, Kraft Paper, and on corrugated paperboard, from 12% to 18%. ICCMA has highlighted that this imbalance has created an inverted duty structure, placing heavy strain on MSMEs that form the backbone of the industry. With over one million people directly employed and nearly 7 million tons of Kraft Paper converted into packaging annually, the industry believes such a structure will hinder growth, discourage automation, and create barriers for India’s packaging competitiveness globally.

The Corrugated Paper Packaging Industry, spread across the country with about 7,000 semi-automatic units and 600 automatic plants, directly employs over 1 million people. This 100% MSME owner-driven sector converts nearly 7 million tons of Kraft Paper into corrugated packaging every year.

Under GST 2.0, the decision to reduce GST from 12% to 5% on Corrugated Paper Boxes (Chapter 4819) has been described as a welcome and progressive step. According to the Indian Corrugated Case Manufacturers’ Association (ICCMA), this move supports the MSME sector and will help reduce the overall cost of secondary packaging across the supply chain.

However, ICCMA has expressed deep concern that the GST on the principal raw material – Kraft Paper (Chapter 4804 & 4805) – has been increased from 12% to 18%. Similarly, Corrugated Paper Board (Chapter 4808) has also been raised from 12% to 18%.

In a formal communication addressed to the Hon’ble Prime Minister, ICCMA highlighted that this has created an inverted duty structure with a huge 13% differential, which goes against the vision of supporting MSMEs. The association warned that this anomaly will result in:

1. Severe working capital blockage due to higher input tax outgo.
2. Cumbersome refund procedures and additional paperwork, which are extremely challenging for owner-driven MSMEs.
3. Ambiguity and misinterpretation arising from keeping Chapters 4808 and 4819 at different GST rates.

4. Discouragement of automation and expansion, as the inverted structure will not allow Input Credit on Capital Goods GST, creating barriers for new investments and limiting India’s ability to deliver world-class packaging for exports.

ICCMA emphasized that historically, Kraft Paper and Corrugated Packaging have always been kept at duty parity, ensuring balance and ease of operations. The association urged the government to maintain GST parity across Chapters 4804, 4805, 4808, and 4819 to avoid inverted duty structures and ambiguity.

In its appeal to the Prime Minister, ICCMA further requested relief for MSMEs from onerous compliance and refund processes, noting that such procedures drain valuable time and resources from owner-driven businesses.

UP Paper Mills voice concern Over GST Hike

The Central Government has decided to increase the GST rate on paper from 12% to 18%. The Uttar Pradesh Paper Mills Association has expressed its opposition to the proposed hike and has written to the Union Finance Minister, conveying its concerns. Around 32 paper mills operate in the district, many of which fear the new tax rate will add to their challenges.

Industry representatives pointed out that while the government recently announced relief in certain GST slabs, the decision to raise GST on paper has come as a setback. Mill owners also highlighted that the 50% tariff imposed by the United States on imports is already impacting them, and the additional GST burden could further harm the industry.

According to media report, Abhishek Agarwal, paper mill owner and Secretary of the Federation of Muzaffarnagar Commerce and Industry, said the paper sector is already under stress due to tariff pressures. “At such a time, the decision to increase GST on paper is difficult to understand. This will only create further difficulties for the industry,” he noted.

Echoing this concern, Pankaj Agarwal, President of the UP Paper Mills Association and former Chairman of the Municipal Council, said, “We were expecting relief from the government. Instead, this decision has placed entrepreneurs under added strain.” He further stated that the Association will approach the Union Finance Ministry and the GST Council to reconsider and roll back the increase.
 

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