Paper and paper products such as cardboard and packaging material are one of the largest industries in India. It has close linkages with the agricultural sector.
The use of paper needs to be incentivised since it is an environment-friendly alternative to packaging made of plastic.
Paper used for stationery purposes is seeing rising competition from the popularity of digital media and communication. Hence, the paper industry may require special protection, considering the changing market forces.
The tax applicable to paper and paper products has changed under the new GST regime, and might significantly impact the paper and packaging industry.
Taxation On Paper Before GST
Before the implementation of GST, paper products attracted various tax rates according to the relevant state laws and applicable excise duty.
On the whole, the applicable excise duty on the sale of paper used to be 6%. In addition to the excise duty, paper attracted a VAT which varied between 4% to 6%. This was a special concessional rate, keeping in mind the essential nature of such products.
Hence, the total effective tax rate on paper and paper products used to be approximately 11%.
The primary raw materials that were required to make paper and paper products used to be taxed at a rate between four per cent to six per cent. The most important raw material for making paper which is wood and paper pulp were not taxed under the previous regime.
Taxation On Paper And Related Products Under GST
Under the new GST system, there is no blanket tax rate on all paper products. Paper merchants will have to pay gst online at various prices for different paper and paper products, as deemed necessary by tax authorities.
Almost all kinds of paper products that are available in the market will fall under Chapter 48 of the GST HSN Code.
The applicable GST rate for various paper products is as follows:
Nil Tax Rate
- Judicial stamp paper
- Non-judicial stamps
- Court fee stamps sold by Government Treasury
- Postal items such as postcards and envelopes
- Cheque books
- Rupee notes
5% Tax Rate
- Newsprint rolls and sheets
- Kites (Changed from 12%)
- Paper pulp and moulded trays (Changed from 12%)
- Articles made of papier-mache (Changed from 12%)
12% Tax Rate
- Uncoated paper and paperboard
- Greaseproof paper
- Uncoated kraft paper
- Composite paper
- Glassine paper
- Aseptic packaging paper
- Paper cartons
- Boxes
- Corrugated paper boxes or writing compendiums which contain paper stationery
- Braille paper
- Asphaltic roofing sheets
- Paper splints on matches
- Exercise books and notebooks (Changed from 18%)
18% Tax Rate
The majority of paper products that do not come under other tax slabs are taxed at 18% GST. This includes wallpaper, similar wall coverings and transparent window papers, previously taxed at 28%.
Currently, there are no paper products that are taxable at 28%.
Implications Of The New Tax Rate On Paper And Paper Products
As we can see, there is a wide range of applicable tax on various paper-related goods. Hence, the new GST regime will affect different stakeholders differently. While analysing the impact of the applicable GST on such products, we must also consider the rates at which raw materials are taxed.
Mechanical wood pulp which is the principal raw material involved in the making of paper products, is taxed at a CGST of 6%. This is a much higher rate than the pre-GST era when wood pulp was not taxable at all.
The rising cost of raw materials for the production of paper can be detrimental to the health of the industry, mainly due to the increasing adoption of digital media.
Packaging material such as aseptic packaging paper which is used to pack food products is taxable at the rate of 12%. This is lower than the usual tax rate applicable for paper products and can be helpful for the packaging industry. Paperboard, which is also a highly popular material used for packaging, is also taxable at 12%.
Overall, the taxation on paper products is dependent on how essential the product is considered for society.
Conclusion
The new GST regime has raised the applicable tax on certain paper products while reducing it on others. The classification of paper products under this system is dependent on the international rating of products called HSN.
If you’re a businessman involved in the paper industry, you should also find out how to track gst registration status to help you pay the applicable taxes.
