GST reforms may flood India with paper imports, warns industry body IPMA - Business Standard

Indian paper industry has raised concern over the potential surge in paper imports following the recent GST reforms, warning that the move could erode domestic competitiveness and undermine the government's flagship Make in India' initiative.

Indian Paper Manufacturers Association (IPMA) President Pawan Agarwal, in a statement, said that with the recent GST changes, India risks becoming a further dumping ground for cheaper paper from abroad.

While domestic manufacturers are being burdened with higher input costs, imported paper used for exercise books and notebooks will now enter the country completely tax-free. This will distort market dynamics and deal a blow to Indian producers, Agarwal said.

Paper imports into India have already doubled in the last four years, growing at a CAGR of over 17 per cent in volume terms one of the steepest among major commodities, according to the IPMA.

Citing the Commerce Department data, IPMA stated that imports of paper and paperboard rose from 1.08 million tonnes in FY21 to 2.06 million tonnes in FY25, touching nearly Rs 15,000 crore in value terms.

The industry now fears that this rising trend could turn into a deluge because of the GST changes, the body said.

Under the revised GST structure, uncoated paper used for exercise books and notebooks has been exempted from GST, and consequently, the Integrated GST (IGST) on imports of such paper has also been reduced to nil.

As a result, foreign exporters will pay no IGST, while Indian manufacturers, now ineligible for input tax credit (ITC) due to exempted GST on the final product, will have to absorb the embedded input tax in their cost structure. This, according to IPMA, creates a sharp price differential that will make imported paper substantially cheaper than domestic production.

The association added that domestic manufacturers of notebooks and textbooks, who can no longer avail ITC, will see production costs rise by 35 per cent for notebooks and over 6 per cent for printed and textbooks, ultimately burdening school children and the education sector.