GST on Cement Purchase in 2022 [Tax Rates, HSN Codes]

Cement is a widely used raw material in many areas, from infrastructure projects to the construction sector. India is the second-largest cement producer globally, with a production capacity of around 340 million metric tonnes. Further, of the globally installed capacity, India's share is a mighty 8%. These figures depict India's cement industry as a success story, but before we jump to this conclusion, let's look at our next big competitor- China.

China's production capacity is 2.2 billion metric tonnes(yes, in billions!), producing over 50% of the world's cement needs. It indicates that China has a whopping 6.5 times more cement than what India is currently making. One of the reasons why China is leaps ahead of us could be the GST on the cement industry. Also, have you, as a consumer, wondered why the cost of cement is spiralling upwards?

We, through this post, share our comprehensive analysis of the GST on the cement industry and more.

The latest GST rates on cement and its raw materials

Before we get to the GST on the cement industry, it is vital to understand the applicable GST rates. We represent the same in a tabular manner as below:-

Regarding the above table, it is visible that the high GST on the cement industry is 28%. In comparison, China levies a mere 9% VAT.

1. Impact of GST in the hands of consumers

It is pertinent to remember that GST is a consumption-based tax collected on goods and services as regular customers. Put, the higher the GST rate, the higher the burden on the ultimate consumer. Moreover, they cannot claim input credit on GST paid. Currently, consumers are enduring the 28% GST rate in the form of the high cost of real estate and high toll charges on highways.

2. Impact of GST in the hands of cement manufacturing units

Under the old regime, the effective VAT rate of cement was around 27%-31% approximately. This rate has been marginally reduced to 28% in the present GST regime, which is positive news for manufacturing companies. Despite this, such high tax rates can lead to the underutilisation of the company's installed capacity. Therefore, a reduced GST on the cement industry can also significantly boost India's cement production capacity.

3. Impact of GST on transportation cost

Introducing GST has streamlined interstate transport and paperwork of goods. It inadvertently leads to a lower cost of transportation. There are no longer long queues at state checkpoints, resulting in faster cement transport across the country. It is a positive GST on the cement industry. It is also splendid news for consumers, as it leads to lower prices of cement.

Also Read: Best Cement Brands in India

4. Impact of GST on real estate and construction sector

One of the highest consumption of cement is by the real estate and construction sector. The high GST on the cement industry has a positive correlation to this sector. High GST on cement leads to increased operating costs for the real estate and construction sector. Add to this the non-availability of ITC during the construction phase. All these factors can unfavourably affect the demand for cement in India.

Conclusion

While there can be no dispute, introducing GST has reduced tax rates and led to relatively easy compliance. However, the high GST on the cement industry can adversely affect all the major stakeholders like consumers, manufacturing units, and the real estate sector. Further, to overtake China as the leading producer of cement, India must adopt competitive GST rates.

As the government focuses on driving investment in construction and real estate, GST rates on cement and its forms must be lowered to provide an incentive to all the stakeholders. With that being said, the major cement companies must pass on the benefits of lower costs and taxes to the ultimate consumer. Only if these steps are undertaken will there be a revival in demand for infrastructure and construction projects.

We earnestly believe that our all-inclusive post on the GST on the cement industry has been of value-addition to you. For more such exclusive content, keep visiting Ok Credit. You can also check out our app OKCredit, which can help you manage your business transactions.

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FAQs

Q. What is the applicable rate of GST on cement?

Ans. The ordinary cement used in construction attracts a 28% GST rate. While other forms of cement, like refractory cement, mortars, concrete, and similar compositions, attract GST @18%.

Q. Did the introduction of GST lead to an increase in the prices of cement?

Ans. While it is hard to confirm this categorically, the high impact of GST on the cement industry has played a part in the increase in cement prices. The compliance costs under GST and taxes on raw material could also be the primary reasons for this steep rise.

Q. Can we expect a drop in the prices of cement in the future?

Ans. It is improbable that the prices of cement will fall in the future. The primary reason for this is the rising demand from the real estate and construction sector. Another factor is India's stunted capacity utilisation. However, if GST is lower in the cement industry, we most likely may see a temporary drop in prices.