The Exercise Book Manufacturers Association has raised concerns over an inverted duty structure in the recent rationalisation of GST rates.
The GST Council recently reduced the GST rate on books and notebooks to zero. However, the GST rate on paper and paper boards were increased to 18 per cent.
President, the Exercise Book Manufacturers Association (Maharashtra) said the inverted duty structure will push up production costs and significant compliance challenges to manufactures.
The retail prices of notebooks may increase by 15-20 per cent, he said.
While books are exempted from GST, related products such as diaries, memo pads and registers remain taxable.
“We seek immediate clarification on ITC (Input Tax Credit) treatment in the case of mixed supply,” he said.
The Offset Printers Association said the increase in GST on paper could result in 30 per cent of units shutting down, which would raise the prices of textbooks for 200 million students.
Further, paper boards are taxed at 18 per cent, while printing services are taxed at 5 per cent. Consumables like lamination, gum, ink and other raw materials used in notebook/book production also attract GST.
When such items are used in the production of tax-exempt goods such as books, the input tax credit gets blocked, he said.
The use of same machinery for producing both exempted goods such as books and taxable goods like stationery products creates complications in ITC claims.
He suggested a uniform 5 per cent GST rate be applied to paper and books to eliminate ITC issues, control cost escalation, maintain steady demand and ensure that the general public continues to have access to educational tools at stable prices.
The All India Notebook Manufacturers Association pointed out that since finished books in India attract zero GST, imported finished books and notebooks will enter the Indian market with zero tax.
Domestic manufacturers, burdened by high input GST costs, will not be able to compete with these imports.
Furthermore, imports of cheap paper from countries such as China, Indonesia and ASEAN nations are expected to increase. This will lead to reduced market share for domestic producers, MSME notebook manufacturers and printing presses, potentially increasing unemployment and undermining the ‘Make in India’ initiative.
