Paper industry concerned about GST hike on paper bags, cartons and boxes

The GST Council, in its 45th meeting held on Friday, 17 September 2021, has recommended an increase in the GST rate on cartons, boxes, bags, packing containers of paper etc from 12% to 18%. This move will discourage weaning away consumers from single use plastic said the Indian Paper Manufacturers Association (IPMA).

22 Sep 2021 | By Charmiane Alexander

In a press note, IPMA has expressed concerns over increase in GST rates on paper bags, cartons, boxes and other packaging media which according to the association will make it expensive for consumers to shift away from single-use plastic. 

According to IPMA, this recommendation of the GST Council is "surprising" and "not in sync with the move of the Government towards ban on the use of single-use plastic". 

Recognising the global menace of single-use plastic which is not biodegradable, India had earlier given an international commitment to ban all single-use plastic by 2022. Last month, towards this endeavour, the Government of India amended the Plastic Waste Management Rules prohibiting the manufacture, sale and use of several single-use plastic commodities from 1 July 2022; and also prohibited the use of plastic carry bags with thickness less than 75 microns with effect from 30th September 2021 and 120 microns with effect from 31 December 2022.

The IPMA president, AS Mehta stated that paper is one of the most environmentally sustainable products as it is fully biodegradable, recyclable and is produced from sources which are renewable and sustainable. Paper provides a viable alternative to single-use plastic in several applications. An increase in the GST rate on paper cartons, boxes and bags will work against the Government’s efforts towards phasing out the use of single-use plastic, he said.

Meanwhile a senior print firm CEO in Bengaluru spoke to PrintWeek on the condition of anonymity. He said, "Print is used not only by corporates who don't mind paying any rate of GST as they claim it back as ITC. The final payer of GST is the end customer who in reality is the aam aadmi. Increasing taxes not only hits them directly, but also makes them look for avenues to avoid payment of such a high rate of tax." 

The CEO said, "Imagine a poor father wanting to get his daughter married - now he has to pay 18% tax on the marriage cards and wedding invites that he wants to print. A student wanting to get a copy of an out-of-print textbook - now has to pay 18% tax on the book he / she needs for her studies. A housewife who has started a small business to support her family and increase her family income has to pay 18% tax on the leaflets, flyers and labels she needs to print to advertise and brand her products." The CEO argued that the list of persons who will be impacted is endless. 

The CEO said, "Increasing taxes may be the easiest way to solve confusion, but it is one not well thought out and not the correct way. The government is forcing honest taxpayers and consumers to find unscrupulous small traders and suppliers who will do business without a bill and avoid the taxes. These traders being small are not targeted by the government as individually they are not worth their time. Collectively these small traders end up hurting the mid-sized firms (like us) who individually and collectively are significant tax collectors for the government." 

The CEO concluded, "Please note we mid-size firms are tax collectors. We charge tax on our invoices, give credit to our customers and even if the payment has not been received or the debt goes bad, remit the funds to the government from our own funds. We are the visible face to the government and we are the ones harassed and affected the most by the acts of the government."

Meanwhile some members of the industry have welcomed the move. Tushar Dhote of DOT in Mumbai has tweeted, "With the latest recommendations, at least the confusion over the GSN number and rates will finally go away." Dhote added, "I know of some SME printers who were charging a flat 18% on any printed material, specially the printers who are doing only labour jobs."

PrintWeek's view:
Simplification augurs well. Having said that, ink-on-paper costs will rise as indicated by IPMA. The age-old question remains: Who will foot the print bill?