India’s GST revisions put corrugated box manufacturers at risk

INDIA – Small and medium-scale corrugated box manufacturers in India are grappling with mounting financial strain following revisions in the Goods and Services Tax (GST) structure, a move industry players say threatens the survival of more than 20,000 enterprises.

The Eastern India Corrugated Box Manufacturers Association has warned that the changes have created an inverted duty structure, with disproportionate tax rates on finished products and raw materials.

Before the revision, both corrugated boxes and their key raw materials, kraft paper and board, were taxed at a uniform 12% under GST, ensuring a balanced flow of input tax credits across the supply chain.

However, under the new regime, GST on corrugated paperboard boxes has been slashed to 5%, while kraft paper and board have been increased to 18%.

“This discrepancy has led to a 13% net burden on manufacturers,” the association stated, noting that the imbalance undermines the viability of micro, small, and medium enterprises (MSMEs) in the packaging sector.

Rising costs and capital blockages

The duty mismatch results in blocked working capital, with businesses unable to claim refunds on input tax credits for services such as labour, rent, repairs, job work, and freight.

This is expected to inflate costs by 18% on services and by 5% on freight, forcing manufacturers to consider raising box prices by 5–7%.

Such increases could ripple through to consumers and disrupt supply chains that depend on affordable packaging.

Industry stakeholders are urging the government to restore tax parity between corrugated boxes and their raw materials.

They argue that equalizing GST rates would not impact government revenue, as transactions in this sector are largely business-to-business, with input tax credits applied at each stage.

A vital sector under threat

The corrugated box industry processes nearly seven million tonnes of kraft paper annually and provides employment to more than one million people.

It is also a critical supplier of packaging for e-commerce, pharmaceuticals, and fast-moving consumer goods.

“The current GST disparity threatens not only the survival of MSMEs but also the stability of essential supply chains nationwide,” the association cautioned.

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