Will the GST Council Tackle the Inverted Duty Structure in Notebooks?
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Synopsis
The GST Council's upcoming meeting aims to tackle the inverted duty structure affecting notebooks and textbooks. With high prices remaining an issue, the council considers lowering GST on paper or adjusting tax slabs to restore input tax credits. This move could significantly relieve cost pressures for consumers and manufacturers alike.
Key Takeaways
- The GST Council plans to address the inverted duty structure affecting notebooks and textbooks.
- Manufacturers face higher costs due to GST on input materials.
- Possible solutions include reducing GST on paper or moving notebooks to a lower tax slab.
- The Council's reforms aim to enhance predictability in the tax system.
- Correcting these structures can improve the competitiveness of Indian goods globally.
New Delhi, Sep 26 (NationPress) The GST Council is poised to confront the inverted duty structure affecting notebooks and textbooks in its forthcoming meeting. This issue has been eroding the advantages of recent tax reductions.
Although notebooks and textbooks are exempt from Goods and Services Tax (GST), their prices may still remain elevated due to the 18% GST levied on the paper used for their production. Manufacturers are unable to claim this as an input tax credit, causing costs to rise and impacting final prices, according to sources familiar with the situation.
An inverted duty structure occurs when the GST rate on input materials exceeds that of the finished product, disrupting the credit chain and resulting in blocked input tax credits, ultimately inflating costs for both manufacturers and consumers.
Officials have noted this anomaly concerning notebooks, and the government is aware of it. The next GST Council meeting is expected to rectify this issue.
Proposals may include either lowering the GST on paper or moving notebooks to the 5% slab with input tax credits, both of which could restore the credit chain and alleviate price pressures, according to sources.
Under the leadership of Union Finance Minister Nirmala Sitharaman, the GST Council implemented significant rate rationalization earlier this month, reducing the number of slabs from four to two.
Various industry associations, including the Federation of Indian Chambers of Commerce & Industry, have praised the GST 2.0 reforms for enhancing predictability and transparency within India's tax system, as well as for correcting inverted duty structures across several sectors.
Addressing inverted duty structures in textiles, fertilizers, and renewable energy is expected to decrease import reliance and boost the global cost competitiveness of Indian goods, they noted.
Point of View
We believe that addressing the inverted duty structure is essential for ensuring fairness in the tax system. The GST Council's proactive approach demonstrates a commitment to improving the economic landscape for both consumers and manufacturers. We support these reforms as they align with the nation's goal of fostering growth and competitiveness.
NationPress
26/09/2025
Frequently Asked Questions
What is an inverted duty structure?
An inverted duty structure occurs when the tax rate on inputs is higher than the tax rate on the finished product, leading to blocked input tax credits and increased costs.
How does this affect prices of notebooks?
Due to the 18% GST on paper used to produce notebooks, prices remain high even though notebooks are exempt from GST, causing a financial burden on consumers.
What actions is the GST Council considering?
The GST Council may either reduce the GST on paper or shift notebooks into a 5% tax slab with input tax credits to alleviate cost pressures.
