Impact of GST on Cement Industry | H&R Block
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Impact of GST on Cement Industry

GST implementation will bring good news for cement industry in India. Significant tax reduction is being expected by experts for this sector of economy. Currently, the prevalent tax rates are 27-32% but GST will bring the rates down to 18-20%. The new tax system will help cement industry in reducing their logistics costs. GST will also cover logistics and warehousing industry. Cement industry is heavily dependent on logistics and warehousing industry which contribute to 20-25% of their revenue generation.

Indian cement industry is aimed to grow at a CAGR of 11.14% in volume terms during FY 2011-FY 2017 and is expected to reach 407 million tons by March 2017. This robust growth rate will further be boosted by GST. Several big names among cement manufacturers, such as Ultratech, JK Cement, and Shree Cement are expected to benefit from the new tax reform in India. The reports suggest that the introduction of Goods and Services Tax in India will certainly benefit the Indian cement industry and improve their profitability as well. GST India is likely to have a positive impact on the cement industry and will also benefit the concrete admixtures manufacturing sector.

 

According to a recent report, “India Naphthalene and PCE based Admixtures Market By Type, Competition Forecast & Opportunities, 2011 – 2021”, naphthalene and polycarboxylate (PCE) admixtures market in India is expected to reach USD 683 million by the year 2021. Real estate sector is the major consumer for cement industry. However the growth in the sector has been nearly stagnant for the past few years. Several reforms taken by the government are expected to give realty sector a boost. Strong growth in the real estate sector, increasing government projects on infrastructure development and implementation of stringent regulatory norms will help in boosting demand for naphthalene and polycarboxylate (PCE) based admixtures in India by the coming next five years. Again the major names among the naphthalene and PCE based admixtures manufacturers in the country include BASF, Fosroc and SIKA.

Cement India is the second largest producer in the world and in the next 10 years, India can become the net exporter of cement and clinker. The main raw materials for cement are limestone, coal and electricity. Limestone, for quarrying, the cement companies have to pay royalty to the state governments and for coal, apart from the GST, there will be levy of clean energy cess which is not available as a credit because it is not part of the GST regime subsumes. So, therefore, as far as the cement industry is concerned, these two factors will continue to be outside the GST and therefore, it has to be absorbed as cost of the cement production.

If GST is levied on electricity, again it is going to increase the cost. So we hope all this is available as a credit while paying GST on the cement.

The service tax paid on the transportation cost, etc. if it is not made available at the dealers’ level, all becomes cost of the cement production and unless and until the rates of GST on cement is kept at the level of not more than 12 percent, it is going to have adverse impact as far as the infrastructure industry is concerned.

Latest Update

In contrast to the expectations of the industry, the government has levied GST @ 28% on cement. This has resulted in higher cement prices from July 1, 2017. However, since some of the inputs have been put under 5% tax bracket and logistics costs are expected to go down, you can expect cement prices to go down once things settle in place. The current rise in price should be temporary but more clarity will come on the same with time.

Niteesh Singh
Niteesh Singh
Niteesh works as a Tax Researcher at H&R Block India. He makes taxes easy to understand for people. He creates content for the website, marketing activities and social media. He carries experience in creating a wide variety of content like blogs, press releases, research papers, etc.

14 Comments

  1. Rahul says:

    Thanks for sharing. Awesome stuff!!

  2. priyanka says:

    HI H&R block,

    So will it be better to get Cement after GST ? as said above the cement price is going to fall after GST.

  3. Prince Kumar says:

    Sir please tell me that is really the price of cement is going to fall

  4. souvik banerjee says:

    Will it be reasonable to buy cement after GST? Or I should buy right now? If the price fall then after how much time of gst the cement price Will fall?

  5. Ashish Dubey says:

    Whether non trade cement sale will also increased by 28%

  6. Narinder pal singh says:

    In sangrur punjab dealer says that the price of cement become high after gst.They missguide us. Please tell us right position. Thanks

  7. sanjay says:

    some one saying cement rate increase and some peoples are saying cement rate decrease. After GST I am confused…

  8. siva kumar says:

    Great blog you’ve got here. It’s packed full of lots of information about cement and cement price GST impact.

  9. Adele says:

    Wow, your article about GST Impact 2017 is really good, I have the little confusion about GST impact, but now I have cleared all doubts. Thanks for sharing this wonderful article with us. GST is also impacted in Medicines. I think Good and Service text effect will be pros for common people.

  10. Sanjay says:

    Cement price of ultratech touched 335 from 305 per bag if 100 bags purchased.this is 10 the day of gat,god knows????

  11. KIRAN says:

    SIR WE PURCHASE CEMENTS BAGS IT WILL TAKE INPUT

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