Zero tax on notebooks welcomed, but students may end up paying more if input credit issue persists

According to Badrinath T, Partner at the Chennai-based notebook manufacturers Sri Ram & Co., and P R Natham & Co., since the announcement of the GST reforms, the industry has made several requests to the government asking for a clarification as it is a matter of survival for the manufacturers who operate on a thin margin to pay 18 percent tax on paper and board (the key raw materials) and to sell the notebook at zero percent with no input credit benefit.”

Industry experts emphasise that the current challenges do not just affect manufacturers, but have broader implications for millions of students and families relying on affordable educational resources. A timely and effective government intervention is critical to ensure that the benefits of the GST reforms reach their intended beneficiaries, while also securing the sustainability of a vital domestic industry.

A tax expert at EY India, Saurabh Agarwal, Tax Partner at the foreign consultancy firm, says: “The Governments commitment in reducing GST on books to make education more accessible is a welcome move. However, a significant unintentional hurdle lies in the current HSN 4820 classification, which creates ambiguity. Paper mills, which are the point of supply, have no reliable way to track or verify the end-use of their product. This creates a gray area, leaving them vulnerable to potential disputes and scrutiny from GST authorities who may question whether the paper was legitimately sold at the lower rate.”

According to Agarwal, to truly realise the vision of affordable education, this unintentional issue needs to be resolved in a time bound manner.

“A mechanism is needed that ensures paper for notebook manufacturing can be procured at the nil rate without ambiguity. Such a system would not only protect the government’s policy intent but also provide the paper industry with the certainty and clarity required for seamless compliance, ensuring the benefits reach the students for whom they are intended,” he added.

As the issue garners attention, industry leaders remain hopeful for swift government action, recognising the leadership shown by the GST Council and expressing gratitude for its commitment to education affordability and industrial support.