GST treatment of ruled paper for notebooks: Analysis of In re Mangalam Kallani HUF (GST AAR West Bengal)

1. Background and context

The ruling in In re Mangalam Kallani HUF (GST AAR West Bengal) addresses a common issue for paper converters and notebook manufacturers: how to classify ruled/lined paper sheets under the Customs Tariff Act, 1975 and how to apply the NIL GST rate under Notification No. 10/2025-Central Tax (Rate) dated 17.09.2025, particularly Serial No. 128.

The applicant, M/s Mangalam Kallani HUF, operates under the trade name “Marvel Products” and runs a manufacturing facility in Siliguri, West Bengal. Its activity consists of:

  • Procuring uncoated paper and paperboard in reels, classifiable under HSN 48025590, from paper mills;
  • Processing these reels in-house by simultaneous cutting and ruling/lining into standard notebook-size sheets; and
  • Supplying the resulting ruled/lined sheets to manufacturers of exercise books, graph books, laboratory notebooks and similar stationery products.

The assessee approached the Authority for Advance Ruling (AAR) under Section 97(1) of the GST Act (i.e., the CGST Act, 2017 read with the WBGST Act, 2017) seeking clarity on:

  • Proper tariff classification of the ruled/lined sheets;
  • Eligibility for NIL rate under Serial No. 128 of Notification No. 10/2025-Central Tax (Rate);
  • Documentary requirements to substantiate end use; and
  • GST and input tax credit implications relating to inward supplies of uncoated paper reels from paper mills.

The AAR examined the matter by referring to Chapter 48 of the Customs Tariff Act, 1975, particularly Heading 4802 and Heading 4820, and considered relevant Chapter Notes and interpretative principles, including the Supreme Court ruling in Commissioner of Customs (Import), Mumbai v. M/s. Dilip Kumar and Company & Ors. (2018) 9 SCC 1 on strict interpretation of exemption notifications.

2. Scope of advance ruling and admissible questions

The AAR first revisited Section 97(2) of the CGST Act, 2017, which specifies the limited categories of issues on which advance rulings can be given, namely:

  • Classification of goods or services (Section 97(2)(a));
  • Applicability of a notification issued under the GST law (Section 97(2)(b));
  • Time and value of supply;
  • Admissibility of input tax credit;
  • Determination of liability to pay tax;
  • Requirement for registration; and
  • Whether a particular activity amounts to a supply.

On this basis, the AAR held:

  • Question 1 (classification) – admissible under Section 97(2)(a) / Section 97(2)(e);
  • Question 2 (applicability of Serial No. 128 and rate, including 18%) – admissible under Section 97(2)(b);
  • Question 4 (applicability of NIL rate on inward reels and ITC consequences) – also within Section 97(2)(b) read with ITC provisions; but
  • Question 3 (what specific declarations/undertakings/documents are required) – not admissible, as the notification itself does not prescribe any such formats or mechanism, and the AAR cannot introduce documentation requirements not contained in law or notification.

Accordingly, the ruling proceeds only on Questions 1, 2 and 4, rejecting Question 3 as outside jurisdiction.

3. Applicant’s business operations and submissions

3.1 Nature of manufacturing activity

The assessee’s submissions describe a single integrated process:

  1. Uncoated paper reels (HSN 48025590) are sourced from paper mills. These are “other uncoated paper and paperboard, of a kind used for writing, printing or other graphic purposes, in rolls, weighing between 40 g/m² and 150 g/m².”
  2. At the factory, reels are directly fed into ruling machines. In one continuous operation, the machine:
    • Cuts the reel into notebook-sized sheets; and
    • Applies horizontal ruling, and where required, graph ruling and margins.
  3. There is no intermediate storage of cut blank sheets; the process runs from reels to finished ruled sheets.
  4. The assessee retains ownership of the paper throughout and sells the finished ruled/lined sheets to notebook manufacturers on a principal-to-principal basis.

The ruled sheets are said to be exclusively supplied to manufacturers of:

  • Exercise books,
  • Graph books,
  • Laboratory notebooks, and
  • Other comparable education-related notebooks.

The assessee contends that these ruled sheets are not marketed for any other purpose among its buyers.

3.2 Classification claim under Heading 4802

For classification, the assessee argues:

  • The process of ruling/lining is a form of mechanical application of ink and does not change the essential character of the product, which remains uncoated paper in sheet form.
  • The sheets are not bound, not covered, and do not become a finished stationery article by mere ruling; they remain intermediate paper material.
  • Heading 4820 deals with finished items such as “exercise books, graph books, laboratory notebooks, notebooks, registers, diaries, binders, folders and other articles of stationery.” Loose sheets do not fall within these articles.
  • The assessee refers to Explanatory Notes to Heading 4802 under the Harmonised System, which recognise that paper can bear grid lines, feint ruling or similar markings and still remain classifiable under Heading 4802, unless the printing gives the product the character of “printed matter” of Chapter 49.
  • As no Chapter Note in Chapter 48 excludes ruled paper from Heading 4802, the assessee submits that its product remains within HSN 48025790 or the appropriate residual sub-heading of Heading 4802 for sheets.

3.3 Claim to NIL rate under Serial No. 128

Under the post‑22.09.2025 rate structure:

  • Notification No. 10/2025-Central Tax (Rate) grants NIL GST under Serial No. 128 to:
    “Uncoated paper and paperboard, of a kind used for writing, printing or other graphic purposes, in rolls or rectangular (including square) sheets, of any size, other than paper of heading 4801 or 4803, used for exercise book, graph book, laboratory note book and notebooks.”
  • `Serial No.