Zero-Rated GST on Notebooks and Copies: Refund Mechanism Key to Stability, Says IRPTA’s Naresh Singhal

Zero-Rated GST on Notebooks and Copies: Refund Mechanism Key to Stability, Says IRPTA’s Naresh Singhal

-From Mills to Classrooms: GST Refunds Crucial for Notebook Prices
The Pulp and Paper Times

New Delhi, September 23, 2025 – The Indian paper and notebook manufacturing sector is caught between policy clarity and implementation challenges, as the government’s recent move to make notebooks and copies zero-rated under GST creates both opportunities and confusion.

Speaking to The Pulp and Paper Times, Naresh Singhal, President- Indian Recovered Paper Traders Association (IRPTA), explained the critical difference between zero-rated and exempted goods under the Goods and Services Tax (GST) framework. According to him, the distinction is essential for understanding how small-scale notebook manufacturers and paper mills will operate in the new regime.

Zero-Rated vs. Exempted: A Key Distinction

“Many in the industry are misinterpreting the government’s announcement,” Singhal said. “Zero-rated goods are not the same as exempted goods. When a product is exempted, the manufacturer cannot claim input tax credit. But when it is zero-rated, manufacturers can claim a refund of the tax already paid on inputs—whether 5%, 12%, or 18%—which will be credited back through the refund system.”
He explained with an example:

• A notebook manufacturer purchases paper at 18% GST.
• When that notebook is sold, it is classified as zero-rated.
• The manufacturer can then claim a refund of the 18% GST paid earlier, which the government has promised to process within 15–20 days through an automated refund mechanism.

“This ensures that the input cost does not inflate the final price of notebooks and exercise books, which are essential for education,” he added.

Paper Mills’ Dilemma

Despite this clarity in policy, paper mills remain cautious. “Mills argue they cannot determine the end-use of paper at the time of sale. They don’t know whether it will go into notebooks, lab books, or commercial printing. That is why mills are continuing to charge 18% GST upfront. The refund mechanism is supposed to address this,” Singhal said.

He compared the situation to earlier practices in the newsprint industry (2000–2005), where publishers had to register with the Registrar of Newspapers of India (RNI) to qualify for tax exemptions. “In the current framework, no such registration mechanism exists for notebook manufacturers. The government will either have to rely on automated refunds or set up an institution where manufacturers register to prove their eligibility,” he suggested.

MSME Concerns and Market Competition

Most notebook and exercise book makers fall under the MSME category, which makes efficient refunds crucial for their survival. “Small-scale players often don’t have the working capital to wait months for refunds. If the system functions as promised—refunds in 15–20 days—it will help them remain competitive. Otherwise, only bigger players will benefit,” Singhal warned.

He also highlighted competition issues: “Many small ruling plants fold, stitch, and bind paper sheets into notebooks. If they manage refunds effectively, they can sell at competitive rates. But if delays occur, they may be forced to increase notebook prices by 15–20%, which is not viable in today’s highly competitive market.”

Paper Classified as ‘Standard Goods’

According to Singhal, the government’s GST classification reflects how it views paper. “The GST Council has divided goods into three categories—most essential, essential, and standard. Paper falls in the ‘standard’ category, taxed at 18%. Only notebooks and copies have been zero-rated to support education. That’s why the distinction between standard paper and zero-rated notebooks is critical,” he said.

The Way Forward

Singhal emphasized that clarity will emerge in the coming weeks. “The government has already announced development of a software that will auto-generate refunds, much like income tax refunds. Within 10–15 days, I expect the confusion to settle. Notebook manufacturers will either buy paper at 18% and claim refunds, or the government will design a registration-based system for them to procure zero-rated inputs directly.”

He concluded with a note of cautious optimism: “The intention is clear—education is a priority, and the government wants exercise books to remain affordable. But execution will decide whether MSMEs benefit from the zero-rating or whether larger players corner the advantage.”

He further added, “Corrugators, box makers, and all other paper converters who sell their finished products in the 5% GST slab but purchase paper and paperboard at 18% will be eligible to claim the difference between input tax credit and outward GST through the refund mechanism. Concerned stakeholders are advised not to panic; things are expected to settle soon in the near future.”
 

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