Impact of GST 2.0 on the Cement Industry
The implementation of GST 2.0 in India has brought a major tax overhaul, particularly impacting the construction and cement sectors. One of the most significant changes under GST 2.0 has been the reduction of the Goods and Services Tax on cement from 28% to 18%, as part of the government’s broader effort to simplify tax slabs and rationalise rates into primarily two tiers (5% and 18%).
For the cement industry, this rate cut lowers the direct tax burden on one of the key inputs in construction. Since cement constitutes a substantial portion of building and infrastructure costs, the tax reduction has the potential to moderately reduce end-product prices and improve cost predictability across projects.
Operationally, the simplified GST structure also supports easier compliance and streamlined interstate movement of goods, enabling manufacturers to consolidate supply chains and reduce logistics bottlenecks—a benefit noted from the broader GST reforms.
However, the impact on demand elasticity remains mixed: while cost savings improve affordability for construction players, cement demand itself is relatively inelastic, meaning significant changes in volume may not emerge immediately. Additionally, some cement companies have reported short-term pressure on profitability due to modest price moderation after passing on tax savings.
Overall, GST 2.0’s tax rationalisation is widely seen as positive for the cement industry by lowering tax costs, simplifying compliance, and supporting broader construction and housing sector growth, particularly over the medium term.
Positive impact of GST on cement industry
Warehousing
Cement manufacturers are likely to benefit significantly in supply chain management under GST. At present, many companies maintain multiple warehouses across different states to avoid CST and state entry taxes. These warehouses often operate below full capacity, resulting in operational inefficiencies. With GST, cement companies can consolidate their warehouses and strategically maintain them in key locations, such as central hubs like Nagpur, leading to improved operational efficiency and cost savings.
Savings on Transport Costs
Although most cement plants are located near limestone quarries, cement demand is spread across the country. This makes transportation costs a significant component of overall expenses. GST is expected to streamline the logistics sector, reducing transit times as vehicles spend less time at state checkpoints. Faster movement of goods will lower transportation costs, providing substantial savings for the cement industry.
Simplified Tax Structure
Currently, cement manufacturers are subject to multiple excise duties depending on factors such as packaging type, customer type, and whether sales are industrial or trade-related. For example:
- Bulk supply: 12% on transaction value plus cess, no specific duty
- Industrial packaged sales: 12% on transaction value plus cess, no specific duty
- Trade packaged sales (MRP-based): 12% on MRP with 30% abatement plus Rs. 120 per tonne
GST will replace this complex structure with a single, uniform rate of 28% on cement, eliminating multiple rates and specific duties. This simplification will reduce compliance requirements and make taxation much less complicated for cement manufacturers.
GST Calculation on Cement (New Rates)
Item
|
Old Calculation (28%)
|
New Calculation (18%)
|
Cement Base Price
|
Rs. 5,000
|
Rs. 5,000
|
GST Amount
|
Rs. 1,400
|
Rs. 900
|
Total Cost
|
Rs. 6,400
|
Rs. 5,900
|
The above table shows a clear comparison of cement costs under the old and new GST rates. Using a GST Calculator, you can easily calculate the GST amount and the final price based on the applicable rate.
GST trends and the real estate industry
The move to a simplified two-slab GST structure of 5% and 18% has reduced much of the complexity in real estate accounting. By lowering GST on key materials such as paints, tiles, and cement to 18%, the government has encouraged developers to pass on cost savings to homebuyers. At the same time, the 5% GST rate on under-construction residential properties, without input tax credit, continues to apply to non-affordable housing to help keep the final price stable for buyers.
What is the GST rate on sand?
The GST rate on sand in India is set at 5%. This relatively low rate aims to keep the costs of basic construction materials affordable, especially for small-scale and rural construction projects. The tax applies to both natural sand and manufactured sand, ensuring uniformity across different types of the material. This rate is crucial for the construction sector as sand is a fundamental component in concrete and other building materials. Keeping the GST on sand low helps manage overall construction costs and supports infrastructure development. If you're registering for GST, you will need to provide the gst registration documents as part of the process.
What is the GST rate on Bricks and Tiles?
As per the new notification effective 22nd September 2025, GST on common construction materials has been reduced to support the "Housing for All" initiative:
- Building Bricks (Clay, Fly Ash): 5% (down from 12%)
- Roofing/Earthen Tiles: 5% (down from 12%)
- Cement/Concrete Blocks: 12% (previously 18%)
Conclusion
The updated GST rates on construction materials significantly ease cost pressures for both builders and homebuyers. Reduced taxes on cement, bricks, and tiles make housing more affordable, simplify compliance, and promote growth in the real estate sector. With clearer slabs and predictable input costs, developers can plan projects more efficiently while supporting the government’s long-term housing and infrastructure goals.
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