India’s domestic notebook manufacturing sector, predominantly run by more than 10,000 micro, small and medium enterprises (MSMEs), is facing an “existential crisis”, according to the All India Notebook Manufacturers Association (AINMA). The association has written to the commerce ministry, highlighting how the current customs and GST regime is disrupting the sector.
In a letter dated September 8, AINMA said the domestic market is being flooded with predatory, low-cost imports of finished notebooks from the Association of Southeast Asian Nations (ASEAN) region, predominantly Indonesia. According to the association, these imports benefit from a tax-free corridor created by the intersection of free trade agreements and domestic tax exemptions.
The domestic industry is also suffering from higher costs due to the current GST framework, which has inadvertently penalised manufacturers of exempt goods such as notebooks, AINMA said.
Moneycontrol spoke to analysts and industry representatives to understand the challenges facing the domestic notebook sector and the steps that could be taken to address them.
Customs and GST rates
According to AINMA, existing international trade agreements, coupled with domestic tax rationalisation efforts, have created an asymmetrical trading environment that penalises domestic production while incentivising imports.
Imports of notebooks from ASEAN countries attract zero import duty. At the same time, notebooks are exempt from GST, which means manufacturers cannot claim input tax credit (ITC) on the raw materials they purchase.
Under the ASEAN Free Trade Agreement (FTA), imports of finished paper products, including exercise books, graph books and laboratory notebooks, are allowed to enter the Indian market at zero percent Basic Customs Duty (BCD) from countries such as Indonesia, Thailand and Malaysia.
In September 2025, the government revised the GST rate on exercise books and notebooks from 12 percent to nil. As a result, the corresponding IGST on imported notebooks also fell to zero.
Impact on Indian manufacturers
In contrast to the tax-free entry of foreign goods, domestic notebook manufacturers face a cost disadvantage, the industry said.
“While the final assembled notebook attracts nil-GST, the major raw materials and auxiliary consumables required for notebook production such as paper, coated paperboard, specialized adhesives, stitching wire, packaging cartons and printing inks continue to attract GST at a standard rate of 18 percent,” AINMA said.
The foreign manufacturer pays no Indian taxes on its finished goods, effectively embedding its lower domestic raw material costs into the final product. In contrast, Indian manufacturers are unable to claim ITC on the 18 percent GST paid on raw materials and consumables.
Under the GST framework, ITC cannot be claimed on final products that are exempt from tax. As a result, domestic manufacturers have to absorb the GST paid on inputs as a cost, AINMA said.
The current GST structure has also not provided relief to end consumers, according to the association.
“Almost immediately following the governmental announcement of the nil GST on notebooks, paper manufacturers unilaterally increased the basic ex-mill price of paper by approximately 12-14 percent,” AINMA said.
What should the government do?
To protect the domestic industry, AINMA has suggested moving notebooks out of the exempt category and placing them in a uniform nominal 5 percent GST slab. This, it said, would unlock the ITC pipeline.
“Manufacturers would then be able to utilise ITC and reduce the tax embedded in their manufacturing costs. Alternatively, the government may consider zero-rating notebooks, which would provide a more complete mechanism for recovery/refund of eligible input taxes and ensure greater tax neutrality,” an tax expert said.
Zero-rating means a good or service is taxed at zero percent but remains within the tax system. This allows businesses to claim ITC for indirect taxes paid on inputs, raw materials, capital goods and services used during production.
Analysts also said the commerce ministry should consider enforcing a Minimum Import Price (MIP) on finished notebook imports from ASEAN countries.
“The government must also order an official anti-profiteering inquiry into the pricing methodologies of domestic paper mills. This will ensure that upstream raw material suppliers do not artificially inflate their costs,” another tax expert said.
