GST Impact on the Indian Cement Industry

The implementation of GST in the country creates a menace in the cement industry. GST council decided on a heavy tax rate on the cement industry of 28 per cent which seems to overburden the sector with already prevailing tax entities and developing areas in the urbanization. Prominent cement manufacturers, such as Ultratech, JK Cement, and Shree Cement are expected to get some setbacks from this GST in India.

The 28% Goods and Services Tax on the Cement industry will certainly make hard expansion choices in the Indian cement industry and will affect their profitability as well. A Higher GST rate creates a negative impact on the cement industry and will also take the concrete admixtures manufacturing sector towards downfall.

According to a recent report, “India Naphthalene and PCE based Admixtures Market By Type, Competition Forecast & Opportunities, 2011 – 2021”, the naphthalene and polycarboxylate (PCE) admixtures market in India is expected to reach USD 683 million by the year 2021. 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. A few of the prominent names in the naphthalene and PCE-based admixtures manufacturers in the country include BASF, Fosroc and SIKA.

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The following concerns regarding the Cement Industry have been expressed by V Lakshmikumaran, Managing Partner, Lakshmikumaran & Sridharan, “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. For limestone, for quarrying, the cement companies have to pay royalties to the state governments and for coal, apart from the GST, there will 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 the cost of the cement production.”

“If GST is levied on electricity, again it is going to increase the cost. I hope all this is available as a credit while paying GST on the cement,” he added.

Moreover, he further clarified “The service tax paid on the transportation cost, etc. if it is not made available at the dealers’ level, all becomes the 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 per cent, it is going to have an adverse impact as far as the infrastructure industry is concerned.”