Bengaluru: Contrary to popular belief that notebook prices would drop following the Centre’s recent GST reforms, the Karnataka Paper Merchants’ and Stationers’ Association warned on Thursday that costs are actually expected to rise for students and parents due to unresolved input tax credit issues.The GST Council recently scrapped the 12% and 28% slabs and moved key educational stationery, including notebooks, pencils and maps into the ‘nil/zero GST bracket’. “These changes made headlines after being touted as tax-free benefits, but the dynamics are different,” the association office-bearers said. “While notebooks were put in the nil rate, the GST on paper and paperboards — the key material used as input for making notebooks and textbooks — has been moved to the 18% GST slab,” they added. “If GST rates on paper are 18% and that on notebooks are nil, how will notebook manufacturers claim input credit? When we lose the ability to get input tax credit, finished products will be become dearer for students and parents,” CP Bhaskar, partner at Bengaluru-based Bhaskar Book Tech, said.According to GST laws, manufacturers cannot offset input taxes paid when the end product is exempt, so input costs get added to the base price, potentially raising retail prices of notebooks. Saravana Kumar, former secretary of the association and representative of Arunodaya Paper Mart, said: “The current changes will only increase the tax burden on the consumer as the converted final product will be priced more expensively as the input tax cannot be availed or set off. We feel the prices of notebooks are likely to climb 15-16% with the GST hike on paper.” Notebook manufacturers have appealed to the Centre and the GST Council to re-evaluate the GST structure. Kumar said: “We urge placement of notebooks under 5% to solve this structural issue. If the GST on paper and paper products are in the 5% slab, the benefits will be passed on to the consumer without any issues. Without input tax credit on our main material, we are forced to raise prices or absorb losses. Eventually, the end users (students and parents) will be impacted.” Association president Praveen Lunkad and secretary Shivaram Laavu urged the GST Council to move paper and paper products under a single rate of GST at 5 %. The Association also sought clarification from authorities on whether refunds on input tax paid will be permitted under the new regime.
