Increase in GST on Kraft Paper Sparks Outrage Among Corrugated Box Manufacturers

The recent amendment to the Goods and Services Tax (GST), effective from September 2025, has led to an increase in the tax rate on kraft paper, a primary raw material for the corrugated packaging industry, to 18%. In contrast, the GST on finished corrugated products has been reduced to 5%. This adjustment has stirred concerns within the ₹40,000-crore corrugated packaging sector, predominantly composed of micro, small, and medium enterprises (MSMEs), as they are now facing financial strain due to the accumulation of input tax credits that cannot be utilized effectively against output tax liabilities.

For the average citizen and the market, the implications are significant. While a lower GST on corrugated boxes is intended to benefit the agricultural sector and other industries reliant on such packaging, the increased tax on raw materials can lead to higher production costs and ultimately more expensive products for consumers. The heightened financial burden on manufacturers could result in reduced liquidity, which in turn affects their ability to invest in technological advancements, employee training, and overall business growth. This situation poses a direct threat to the competitiveness of Indian manufacturing in the global marketplace.

In terms of long-term outlook, industry leaders are advocating for a restoration of GST neutrality, emphasizing that a proper tax structure is critical for fostering value addition. The Indian Corrugated Case Manufacturers Association (ICCMA) is actively engaging with government officials to address these concerns, highlighting that the current framework hampers critical investments in modernization and operational efficiency. The government’s response to these representations will be pivotal in determining the future sustainability and growth of the corrugated packaging industry, which is integral to India’s manufacturing ecosystem and environmental commitments. Effective dialogue between the industry and policymakers could lead to necessary reforms that enable a balanced approach to taxation within this essential sector.

Source: The Hindu

(Expert Note: This report was independently prepared by the Wealthova Economy team.)