Should School Bags Be Taxed at 18%? A Data-Led Case for 5%
- Nikhil Chawla
- Sep 19
- 3 min read
States spend hundreds of crores on school bags and kits every year. When bags are taxed at 18% GST—while many inputs sit at 5%—that tax often becomes part of the bill for free-distribution schemes where input credit typically isn’t available.
What governments spend on school bags
Uttar Pradesh: Budget provision of ₹350 crore for school bags for 2+ crore students (Classes 1–8) (UP Budget 2024–25).
Andhra Pradesh: Vidyarthi Mitra school kits (bag included) cost ₹953 crore for -35 lakh students in 2025 (Indian Express / Deccan Chronicle).
Telangana: Proposed “KCR School Kits”—bag, shoes, socks, etc.—for 25 lakh students at ₹400 crore per year (Deccan Chronicle).
What this shows: Even with just these three states, we’re already in the hundreds of crores per year. Extend across other states running similar kit/bag schemes and the national annual spend likely crosses ₹1,000 crore (directional inference from the cited state figures).
Where GST sits today for bags
Travel goods & bags (HSN 4202) are generally treated in the standard slab (18%)—for instance, jute handbags/shopping bags (4202 22 30) at 18% (CBIC sectoral FAQ).
The broader reform now emphasises a two-slab grid (5% and 18%) (PIB press document on GST reforms, Sept 2025).
Why this matters: In free-distribution programmes, the procuring entity often cannot claim ITC, so GST becomes part of the purchase cost—i.e., 18% directly increases the programme outlay.
A simple savings lens (no heavy math)
Think in per-bag terms:
If a basic school bag is ₹150 ex-GST, GST at 18% is ₹27. At 5%, it’s ₹7.5.
Potential saving: ₹19.5 per bag.
For a run of 2 crore bags, that’s roughly ₹39 crore saved (₹19.5 × 2,00,00,000).
If the ex-GST price is ₹200, saving = ₹26 per bag, or ₹52 crore for 2 crore units.
(Rates and unit prices vary by spec and tender, but the direction is clear: every percentage point matters at scale.)
The policy logic for 5% on school bags
Equity: A school bag is a learning essential, closer to textbooks than to travel goods.
Fiscal efficiency: Lower GST on school bags (especially for government/educational procurement) reduces taxpayer outlay without changing what a child receives.
MSME health: Bag makers serving these programmes face a 5% inputs / 18% output structure that can tighten monthly cash flows; aligning school-bag output to 5% reduces friction.
Constructive options (measured and practical)
Adopt a harmonised 5% GST for articles under HSN 4202. A single, consumer-facing rate across this category brings clarity, reduces classification disputes, and supports MSME liquidity without distorting pricing between public procurement and household purchases.
Ensure transparent pass-through. Pair the rate change with clear guidance and monitoring so the benefit is reflected in transaction prices for both institutional buys and retail customers.
Keep compliance simple. Issue a concise HSN note with exemplars and standard invoice language to minimise interpretation risk and administrative friction.
Let’s keep this a conversation
This isn’t about special pleading—it’s about smart design: treating a child’s school bag as a merit good. With states already spending hundreds of crores on kits and bags, a 5% rate could send more money to quality and coverage, not tax.
What’s your view? If you work in procurement, manufacturing, or education finance:
Would a 5% school-bag rate improve value for students?
How would it affect your tender pricing and cash cycle?
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