Packaging industry faces headwinds as GST changes favour paper imports

The Indian Paper Manufacturers' Association (IPMA) has cautioned that new GST rates will give an unfair advantage to importers of paper and paperboard, directly impacting the domestic packaging industry. The IPMA is advocating for an 18% Integrated Goods and Services Tax (IGST) on paper imports to level the playing field.

The IPMA argues that the domestic packaging sector, already struggling with "predatory import" of paper and paperboard at zero or preferential import duties, will become even less competitive.

Pawan Agarwal, president of IPMA, "With the reduction of GST on uncoated paper and paperboard (HS Code 4802) to nil, the IGST rate on imports will also drop to nil." He added, "While domestic packaging manufacturers must factor in input taxes, foreign exporters to India will not face IGST, further boosting imports."

Agarwal also highlighted that while the GST rate on pulp has decreased from 12% to 5%, the 18% GST on wood, a key raw material for pulp used in packaging, remains. This disparity is expected to drive up pulp imports, negatively affecting the Indian farming community and leading to significant foreign exchange outflow.

The Association has submitted a memorandum to Prime Minister Narendra Modi, Finance Minister Nirmala Sitharaman, and Commerce Minister Piyush Goyal, urging them to re-evaluate their decision and rectify these discrepancies.

Agarwal added, "This anomaly could jeopardise existing and future investments in packaging capacity enhancement."

IPMA also expressed concern about the increase in GST rates from 12% to 18% for various paper and paperboard grades used in packaging. This change is predicted to negatively impact the entire downstream supply chain and user industries, ultimately leading to increased costs for consumers.