Industry not happy with cement placed in highest slab under GST

The Dollar Business Bureau 

With cement coming under the 28% tax rate structure under Goods and Services Tax (GST), the industry is not happy with the government slotting it under the highest tax structure as the sector is already struggling with low demand.

The Government has failed to take an advantage to spur growth in the already struggling housing and cement sector by placing the commodity in the uppermost tax bracket of 28% under the GST, the industry body Cement Manufacturers Association (CMA) said reacting to the announcement.

The industry body has also lamented that the taxation on cement, the highest in the Asia Pacific region, has impacted the health of the sector that is seeing just 70% of its capacity utilisation because of low demand. 

“On a 50 kg bag of cement costing Rs.300, Rs.180 is tax plus cost of logistics. This is also an industry which is very capital intensive with low margins. GST was an opportunity to provide relief to the industry but has been missed,” Shailendra Chouksey, President, CMA told PTI. 

Since the sector is ailing, putting the commodity in a lower tax rate would have cut down the prices which in turn would have benefitted the housing sector, the largest consumer, he added. 

“Currently, the ‘housing for all’ scheme is a huge ticket for the Government and by cutting the prices of cement, an indication would have gone that it thinks about people,” he said. 

Presently, the taxation on cement in India is nearly 60%, he said, while adding that the tax incidence is the highest in the country compared to the Asia Pacific, which has a median of 11.4%. Even in Sri Lanka, where the tax rates are second highest, it is only 20%.

Chouksey who is also a full-time Director at JK Lakshmi Cement said, “Prior to 2011, the industry was witnessing a growth of double digit but since 2012, it has dropped to single digit.

In the last fiscal of 2016-17, there was 1% drop. The compound annual growth rate (CAGR) of the last five years was around 4% whereas it was 8% before that period, he said. 

Chouksey said that the total capacity of the industry is 435 million tonnes per year, but only 280 million tonnes was utilised to meet the domestic demand and 5 million tonnes for exports. 

However, he hoped that the sector could witness a growth in view of the focus of government on development of infrastructure and housing.