The price of building India: Why cement remains in the 28% GST slab | Current Affairs | Vision IAS

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The price of building India: Why cement remains in the 28% GST slab

2 min read

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.
  • Tags :
  • Cement
  • Goods and Services Tax (GST) Council
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