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Impact of GST on the Cement Industry in India

After China, the Indian cement industry is the largest producer of cement in the world. With the Indian government’s focus on infrastructural development, affordable housing and roads, the new GST regime will bring with it, a lot of implications regarding the projected growth.

The fact of the matter is that the tax rates for cement have been extremely complex under the previous tax regime. The myriad excise and taxes, on various type of cement, had aggregate rounded off to between 24%-25%, and under the new tax regime, they’ll be uniformly taxed to 28%. Hence, here’s taking a look at the impact that GST is set to have in the cement industry:

Tax slabs on Cement varieties:

  • Mortars, refractory cement, concrete (used for the building of industrial furnaces, ovens etc.) will now attract a tax of 18%.
  • Cement Bonded Particle Board will come with a 12% slab.
  • Main raw materials for cement i.e. limestone, coal and electricity will now be taxed as follows:
    1. Limestone comes under 5% slab
    2. Coal has now been capped at 5% as opposed to the previous 11.69%
  • Electricity does not come under GST

Nothing is mentioned about the royalties that companies pay to the state for quarrying limestone and also the clean energy-cess that is levied on coal, not available as input credit.

Positive Impact of GST on Cement:

  • Warehousing: Supply chain management of cement, will get a boost under GST. The need to maintain multiple warehouses across states will now be done away with. This will, hence, result in the consolidation of warehouses, leading to operational economies.
  • Lesser Transport Costs: Since under GST logistics industry is also being overhauled, hence transit times will also decline at checkpoints. Also, the need to have manufacturing units near quarries will no longer be a priority. All this will lead to the lowering of transportation costs, for the cement industry.
  • The Complexity of Taxes Reduced: With the multiple excise duties done away with, the subsuming of all the indirect taxes will make the taxation system less complex, for the cement industry.

All the positive impacts put together may end up reducing the operating costs for the cement industry in the long run. However, the benefits of it to end-consumers will only be realized, if the cement companies pass on the savings to the consumer faction. Until then, there will a steady rise in the prices of cement, thus also impacting infrastructural costs, across the country.

Tell us more about what you think of the impact of GST on the cement industry, in the comments section below.

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