Indian newsprint manufacturers have sought clarification from the government on the condition of ‘actual user’ because, post GST, there has been no mention of any condition on the buyer for domestic newsprint.
Vijay Kumar, secretary general of the Indian Newsprint Manufacturers’ Association, explained that before the implementation of the GST, newsprint could be produced only by registered mills and sold only to registered publishers to avail of concessional taxes.
Sales to third parties was treated as sale of other grade paper and taxes applied accordingly. However, after GST, there is ambiguity on the actual user condition.
It is learnt that with lack of clarity on the actual user, third parties are actively engaged in sale and purchase of newsprint.
The GST on newsprint is 5% and for other grade paper it is 12%. This gives scope for third parties to manipulate GST rates.
Newsprint manufacturers have written to the government seeking clarity on the definition of newsprint, whether the condition of the actual producer and user still existed, and whether third parties were allowed to sell or buy newsprint produced.
If there were no such conditions, there should be uniform GST rate for all categories of paper to avoid losses to the exchequer, he said.
Mr. Kumar said Indian mills, numbering 124, had the capacity to produce 2.2 million tonnes a year. The annual consumption was nearly 2.6 million tonnes.
Though there was a gap of just about 0.4 million tonnes, newsprint prices dropping globally in the last five to six years had spurred the growth of imports by 1.4 million tonnes. This has resulted in the closure of several domestic mills and currently only 32 mills were functioning, he said. These produce almost one million tonnes of newsprint annually.
Chinese law impact
Significantly, China had come out with environment protection-related conditions last October and had banned the use of certain grades of waste paper in its mills.
So, production by Chinese mills dropped and demand from China for newsprint increased. This led to shortage in availability of imported paper for India, resulting in a skewed demand-supply scenario, he said.