GST Rate on Cement

The 31st GST Council meeting in December 2018 considered reducing the GST rate on cement from 28% to 18% but deferred the decision. Cement, along with automobile parts, remains taxed at the highest slab meant for luxury and sin goods.

• Revenue Impact: Reducing GST on cement and auto parts would impact revenue by ₹33,000 crore.
• Status Quo: Cement continues to be taxed at 28%, a rate initially meant for luxury items.

Cement's Strategic Importance

India is the second-largest cement producer globally with an annual production capacity of 639 million tonnes and production reaching 427 million tonnes in FY24.

• Domestic consumption is 290 kg per capita versus a global average of 540 kg.
• Cement is critical for sectors like affordable housing, infrastructure projects, and urban development.
• Industry petitions seek a reduction in GST to 18% to lower construction costs and improve affordability.

Economic Considerations

Reducing GST on cement is argued to lower construction costs by 5-8%, making housing more affordable.

• Credai estimates a 2-3% price reduction in affordable housing if GST is reduced.

Government's Position

The government is cautious of reducing GST due to potential revenue losses, especially with major revenue-generating items like petroleum still outside GST.

• Cement historically attracted high taxes, continuing under GST.
• The government seeks a revenue-neutral GST rationalization exercise.

Input Tax Credit Issues

Legal experts highlight the burden of input tax credit restrictions on cement, impacting business costs and government revenue.

• Restrictions lead to a cascading tax effect, increasing costs for businesses.
• Abhishek Rastogi challenges the constitutionality of these restrictions in the Supreme Court.

GST Reform and Future Outlook

The debate on cement reflects broader GST system challenges: multiple slabs, rate changes, and Centre-State tensions.

• Experts advocate a streamlined three-rate GST structure for essentials, standard, and luxury goods.
• The government's approach to cement could influence future GST reforms, highlighting its dual role as an economic driver and revenue generator.

A Slab Too High

• Cement remains at 28%, intended for luxury goods.
• Cement accounts for 5-7% of the 28% slab collections.
• High taxation impacts housing affordability and infrastructure development.