India’s paper industry body has warned that recent Goods and Services Tax (GST) changes could trigger a fresh surge in cheap paper imports, undermining domestic manufacturers and the government’s Make in India push. The Indian Paper Manufacturers Association (IPMA) said this week that exempting uncoated paper used in exercise books and notebooks from GST, while simultaneously raising GST on paper and paperboard, has created a lopsided playing field that favours importers over local mills.
IPMA President Pawan Agarwal said India risks becoming “a dumping ground” for cheaper paper from abroad under the revised structure. Under the reformed GST regime, uncoated paper used for exercise books and notebooks has been exempted from GST entirely, and the Integrated GST (IGST) charged on imports of such paper has also been cut to nil, according to the association.
Why Is IPMA Warning That GST Reforms Could Flood India With Paper Imports?
The core of IPMA’s concern is a tax mismatch: GST on paper and paperboard, the primary raw material for domestic mills, has been raised to 18 percent, even as GST on downstream paper packaging products such as boxes, cartons, sacks and bags has been cut from 12 percent to 5 percent. Domestic manufacturers say this combination raises their input costs while allowing tax-free imported paper for notebooks and exercise books to undercut Indian-made products on price. IPMA data shows paper and paperboard imports have already roughly doubled over the past four years, growing at a compound annual rate of more than 17 percent in volume, climbing from 1.08 million tonnes in FY21 to 2.06 million tonnes in FY25.
What Does This Mean for India’s Broader Paper and MSME Sector?
India’s paper industry is dominated by small and mid-sized mills, many of which operate on thin margins and rely on consistent working capital cycles. IPMA argues that the higher 18 percent GST on raw paper will lock up significant working capital for these MSME producers at a time when they are already competing with lower-cost imports, particularly from China, which has emerged as the largest single source of paper imports into India. The association has flagged that a continued rise in low-cost imports could squeeze capacity utilisation at domestic mills, slow planned expansions, and put pressure on jobs in paper-manufacturing clusters across states such as Maharashtra, Gujarat, Tamil Nadu and Andhra Pradesh.
Market Reaction and Industry Response
IPMA has called on the government to review the differential GST treatment and align tax rates on imported and domestically produced paper to prevent what it describes as market distortion. Paper company stocks, including JK Paper, West Coast Paper Mills, Seshasayee Paper and Tamil Nadu Newsprint and Papers, have seen periodic volatility this year as investors track both raw material cost pressure and demand growth in the packaging segment, which continues to expand in the high single digits on the back of e-commerce and organised retail. Industry executives say they are seeking a meeting with the finance ministry to present data on the import surge and its impact on domestic capacity utilisation.
What Happens Next?
IPMA is expected to formally submit its recommendations to the Ministry of Finance seeking a correction in the GST structure for paper and paperboard, potentially through a future GST Council review. In the near term, industry watchers will track monthly import data from China and other exporting nations for signs of the surge IPMA has warned about, as well as any government response on the exemption for notebook and exercise-book paper. The outcome will shape investment decisions at domestic mills, several of which have capacity expansion plans tied to India’s projected paper demand of roughly 30 million tonnes by FY27.
Frequently Asked Questions
Why is IPMA concerned about the recent GST changes on paper?
IPMA says the changes exempt imported paper for notebooks and exercise books from GST while raising GST on domestic raw paper and paperboard to 18 percent, making it cheaper to import paper than to buy it from Indian mills.
How much have India’s paper imports grown?
According to IPMA, paper and paperboard imports have grown at a compound annual rate of more than 17 percent over the past four years, rising from 1.08 million tonnes in FY21 to 2.06 million tonnes in FY25.
Which Indian paper companies could be affected?
Domestic manufacturers such as JK Paper, West Coast Paper Mills, Seshasayee Paper and Tamil Nadu Newsprint and Papers, along with numerous MSME mills, are exposed to margin pressure if cheaper imports continue to rise under the current tax structure.
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