Industry reacts to Council’s GST reduction on carton boxes

In its 53rd meeting on 22 June, the Goods and Service Tax Council recommended reducing GST from 18% to 12% on all kinds of cartons.

24 Jun 2024 | By Noel D'Cunha

Ayush Khetan (CorruCase) and Nitin Shah (Award Offset & Packaging) share their take on the GST reduction

The council recommended reducing GST from 18% to 12% on all kinds of cartons—including cartons, boxes, and cases made of corrugated paper or paperboard and cartons, boxes, and cases made of non-corrugated paper and paperboard.

Ayush Khetan, managing director at CorruCase, Hyderabad, said, “The move may help the MSMEs in corrugated packaging with their working capital requirements. The possibility of brands passing these benefits onto the consumers looks slim because most brands get complete input credit for the GST for their corrugated packaging. Moreover, the expenditure on corrugated packaging for major categories and brands is 1.5-2% of their total expenditure — so a 6% decrease in GST seems to have a negligible impact on the brand to be able to pass it on to the consumers.”

Khetan added, “When it was increased from 12% to 18%, it seemed like a wrong signal because paper or corrugated packaging is a sustainable option for any brand. This move could benefit MSMEs and farmers that export fruits and vegetables because corrugated packaging costs are more substantial than their total expenditure.”

Nitin Shah, director of Award Offset & Packaging, said, “This move by the GST Council and the Finance Minister is more political given the recent general elections and the upcoming state elections.”  Shah added, “In my opinion, all those organised sectors will pass on their savings to end users, reducing the burden on the common man’s pocket. This will result in more savings and more purchasing power. Finally, it will boost the economy of the nation further.” Award Offset & Packaging is headquartered in Mumbai and has a corrugation plant in Silvassa.

Kushl Kumar Jain, one of the major packaging suppliers from Ludhiana, said, “With this move by the government, the cost of packaging will be reduced by 6%. Brands might reduce the prices of their products because of the lower tax rate, making their products more attractive to price-sensitive consumers. This could help increase sales volumes.”

Jain said, “Customers have started reducing the use of packaging. For example, instead of using packaging for a single item, they have started using packaging for six or 12 pieces. Now, with the reduction of GST, brands might choose to invest the savings from the reduced GST into better and more packaging. This could include more sustainable materials, improved design, or additional features that enhance the product’s appeal.” 

He said that some companies may pass the benefit directly to consumers, others may enhance packaging, and some might pay more to packaging suppliers to ensure better quality and innovation. “Each approach has its advantages and is likely to be chosen based on what aligns best with the brand’s overall goals and market conditions,’ he said.

Gagandeep Singh from Pal Box Factory, said, “The packagers are very happy, primarily because it will improve their cash flow. Currently, they are buying at 12% and selling at 18% GST; thus, they were paying 6% upfront GST. Singh added, “Now we can use this money to invest more in sustainable packaging solutions and expand our business.”