The recent decision by the GST Council to exempt notebooks and other school stationary from Goods and Services Tax (GST) is being widely praised as a progressive step towards making education more affordable for millions of students across India. Industry stakeholders have welcomed the reform as a positive move by the government, aimed at reducing the financial burden on families and supporting the education sector.

However, as noted by Unni K Chennamkulath of The New Indian Express, despite the 'Nil GST' status for notebooks, manufacturers face significant challenges due to the inconsistent GST treatment of raw materials, particularly uncoated paper and paperboard—essential components in notebook production. Paper suppliers have continued charging 18% GST on such inputs, while notebook manufacturers, under zero tax category, cannot claim input tax credit (ITC). Under revised GST structure, the government has moved the paper industry to the 18 percent slab from the previous 12 percent one, while the notebooks and other school stationaries has been shifted from 12 percent to zero.

This results in higher production costs, which are inevitably passed on to students, thereby undermining the intent of the GST Council’s decision, according to the industry.

While the industry hoped for a resolution at the industry-government meeting held on Thursday, which involved industry representatives and GST officials, no decision was reached on the issue. However, the GST officials emphasised that the government remains committed to implementing the tax waiver on the end product.

"We presented our case — a genuine issue that affects the sustainability of thousands of small industry units in notebook manufacturing — but no resolution emerged from the meeting. Instead, the authorities stressed that their immediate priority is to implement the government’s decision, and it is up to the industry to price their products in compliance," said Abhinav Jain, a Mumbai-based notebook manufacturer and member of the Exercise Book Manufacturers Association, Maharashtra, who represented the industry at Thursday’s meeting.

Industry representatives have pointed out additional compliance difficulties caused by unclear GST treatment for allied inputs such as board, lamination film, glue, ink, printing labor, and freight services. The current inverted duty structure exacerbates the problem, putting domestic manufacturers at a disadvantage compared to zero-rated imports from ASEAN countries, which enjoy duty- and tax-free entry into the Indian market. This creates a serious risk of market disruption and threatens the viability of thousands of small and medium enterprises (SMEs) engaged in notebook manufacturing.

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.