Corrugated Packaging MSMEs Seek GST Neutrality Over Inverted Tax Structure

New Delhi, Aug 4 (KNN) The Rs 40,000-crore corrugated packaging industry, dominated by MSMEs, has raised concerns over the GST structure effective from September 2025, under which the tax on kraft paper was increased to 18 percent  while the levy on finished corrugated boxes was reduced to 5 percent .

Corrugated Packaging Industry Flags GST Imbalance

Industry representatives said the inverted tax structure has led to a buildup of unutilised input tax credit, locking up manufacturers’ working capital. 

The sector has over 15,000 MSME units supplying packaging for food, agriculture, pharmaceuticals, electronics, textiles, engineering goods and e-commerce. 

MSMEs Seek GST Neutrality For Corrugated Packaging

ICCMA President Rishabh Agarwal said the GST cut on corrugated boxes benefited farmers but the higher tax on kraft paper created an imbalance, reported Businessline.

The industry is seeking GST neutrality, rather than concessions or incentives, arguing that the tax structure should not hinder value addition in manufacturing. 

Rs 366 Crore Working Capital Estimated To Be Locked Monthly

Former ICCMA President Kirit Modi said the current GST structure locks around Rs 366 crore in industry working capital each month, increasing borrowing and financing costs for MSME manufacturers. 

Industry representatives said the GST refund process is time-consuming and documentation-heavy, with delays further straining cash flows for businesses operating on tight margins. 

GST Refund Gaps Raise Investment Costs

Agarwal said input taxes on certain services and capital goods are not fully refundable, raising the cost of technology and capacity expansion. 

Industry veteran Vikash Goel said tax credits locked in the system could instead fund automation, technology upgrades, capacity expansion, employee development and exports. 

The industry also highlighted corrugated packaging’s environmental benefits, citing its biodegradable, recyclable and renewable nature and role in a circular economy. 

ICCMA Seeks GST Council Intervention

ICCMA Immediate Past President Harish Madan said the association has approached Finance Minister Nirmala Sitharaman, Finance Ministry officials, GST Council members, the GST Fitment Committee and state governments. 

The industry has sought either a 5 percent GST on kraft paper or 18 percent on corrugated boxes, with full input tax credit. Madan said ICCMA will continue engaging policymakers and hopes for a rationalised GST structure. 

(KNN Bureau)