GST on Cement

What is GST on Cement?

Goods and Services Tax (GST) is India’s unified indirect tax system that replaced a complex set of levies like excise duty, VAT and central sales tax. Under GST, most goods and services are categorised into simplified tax slabs to reduce cascading taxes and improve ease of compliance.

For many years, cement was placed in the 28 % GST slab, making it one of the highest-taxed construction inputs under the regime. In addition to the base GST, previous notifications included a compensation cess on cement products, pushing the effective tax burden even higher.

However, in a major reform under GST 2.0 effective from 22 September 2025, the GST Council rationalised tax rates into a simplified structure. Cement is now generally taxed at 18 % GST, aligning it with other standard goods rather than keeping it at the top slab. This move has been widely welcomed by builders and the construction sector as it reduces tax-related costs on a key raw material.

HSN Code Insights: Cement Products and Their GST Rates

Under the revised GST system, most cement products attract an 18 % tax rate. This includes Ordinary Portland Cement (OPC), white cement and other hydraulic cements commonly used in construction. 

Cement products are classified under the HSN (Harmonised System of Nomenclature) code 2523, which covers a range of cement types such as:

• Portland and white cement
• Aluminous cement
• Slag or pozzolana cement
• Other hydraulic cements

These classifications must be included on GST invoices and returns to ensure correct tax treatment. 
While the general slab is 18 %, certain related products like cement bricks or building blocks may attract a 5 % GST rate, particularly where they fall under separate HSN categories that support affordable housing initiatives. 

Positive Impact of GST on the Cement Industry

The introduction of GST brought many structural improvements to the cement sector:

1. Simplified tax structure: Before GST, cement manufacturers were subject to a patchwork of taxes, excise duty, VAT, and state entry taxes, which varied across regions. A unified GST framework reduced these overlaps, leading to greater transparency. 
    
2. Streamlined supply chain: Under the old regime, companies often maintained multiple warehouses across states to avoid central sales tax or entry levies. GST has encouraged consolidation of warehouses, improving logistical efficiency and reducing storage costs.
    
3. Lower transport costs: With GST, interstate movement of goods has become smoother due to fewer checkpoints and clearer tax credits. This has helped reduce transit times and overall transport costs, benefiting cement producers and end users alike. 
    
4. Reduced tax burden after rate cut: The shift from 28 % to 18 % GST is especially significant. It lowers the tax component in cement pricing, which can ease pressures on construction costs and potentially stimulate demand both in infrastructure and housing segments. 

Overall, while GST’s high rates initially raised production costs for some manufacturers, the long-term effects, especially rate rationalisation, have supported sectoral growth and competitiveness. 

GST Calculation on Cement

Calculating GST on cement is straightforward under the unified tax system. The basic formula is:

GST Amount = Taxable Value × GST Rate / 100

For example, with the new 18 % rate:

• If a 50 kg bag of cement costs ₹400, the GST amount will be:
• ₹400 × 18 % = ₹72
• Total cost to the buyer would be ₹472, inclusive of GST.

This method applies whether you are a manufacturer billing wholesalers or a retailer selling to end customers. 

For specific products or industrial usages, the applicable HSN code and GST rate must be checked carefully to ensure compliance and correct invoicing.

Transportation cost

Transportation cost refers to the cost incurred in transporting goods from one place to another. In the context of the cement industry, transportation cost plays a significant role in determining the overall cost of production and pricing of cement products.

The transportation cost of cement products can vary depending on the distance between the manufacturing unit and the destination, the mode of transport used, and the availability of infrastructure such as roads, ports, and railways. The cost of transportation can also be influenced by external factors such as fuel prices, taxes, and regulations.

The transportation cost of cement products is a major concern for the cement industry as it can impact the profit margins and competitiveness of the industry. To address this concern, the government has taken measures such as improving the infrastructure and reducing the taxes on transportation. 

Additionally, the industry has also explored alternative modes of transportation, such as using waterways and rail transport to reduce transportation costs. Overall, reducing the transportation cost of cement products can help in increasing the competitiveness of the industry and ensure affordable pricing of cement products.

Warehousing

Warehousing is the process of storing goods in a facility or building known as a warehouse. In the context of the cement industry, warehousing plays a crucial role in ensuring the timely delivery of cement products to customers.

Cement manufacturers and sellers use warehouses to store cement products before they are transported to the final destination. Warehouses are equipped with facilities such as storage racks, loading docks, and security systems to ensure the safe storage of cement products.

Warehousing also plays a significant role in managing the inventory of cement products. By storing the products in a warehouse, manufacturers and sellers can keep track of the number of cement products available and plan the production and supply accordingly.

In addition to storage and inventory management, warehousing can also help in reducing the transportation costs of cement products. By storing the products closer to the final destination, transportation costs can be reduced, leading to cost savings for the industry.

Overall, warehousing is an essential component of the cement industry, playing a crucial role in ensuring the timely delivery of cement products to customers, managing inventory, and reducing transportation costs.

GST Calculation on Cement

The Goods and Services Tax (GST) calculation on cement products involves the application of a GST rate of 28%, along with an additional cess of 12%. The total GST rate for cement products, therefore, comes to 28% + (12% of 28%) = 31.36%.

To calculate the GST on cement products, the following formula can be used:

GST Amount = (Original Cost * GST Rate) / 100

For example, if the original cost of cement is Rs. 100 per bag, the GST amount can be calculated as follows:

GST Amount = (100 * 31.36) / 100 = Rs. 31.36

The total cost of the cement bag including GST would be Rs. 100 + Rs. 31.36 = Rs. 131.36.

However, the government has made some changes to the GST rates for cement products in certain categories. For instance, the GST rate for cement used in affordable housing has been reduced from 28% to 18%. Similarly, the GST rate for cement used for the construction of metro and monorail projects has been reduced from 28% to 12%.

To calculate the GST amount for cement products in these categories, the revised GST rate can be used in the above formula.

In conclusion, the calculation of GST on cement products involves the application of a 28% GST rate and a 12% cess, with certain categories having revised GST rates. The GST calculation is essential for cement manufacturers and sellers to comply with the tax laws and ensure the correct pricing of their products.
 

Impact of GST on Cement Manufacturing Companies

The implementation of GST has had a significant impact on the cement manufacturing companies in India. The introduction of a unified tax system has led to a reduction in the complexities of taxation and has created a more transparent and efficient tax regime.

The GST has streamlined the tax system and eliminated the cascading effect of taxes, resulting in a reduction in the overall tax burden on cement manufacturers. This has helped in reducing the cost of production and making cement products more affordable for consumers.

However, the implementation of GST has also resulted in an increase in the compliance burden for cement manufacturing companies. The companies need to comply with various regulations related to GST, including registration, filing of returns, and payment of taxes.

Current GST Trends and Real Estate Industry

GST reform has had wide-ranging effects beyond the cement industry itself, especially in the real estate and construction sectors.

• Affordability boost: Lower GST rates on cement and other key construction materials such as bricks, sand and steel help reduce the overall cost of building projects. Developers can pass some of these savings to buyers, potentially improving housing affordability. 
   
• Simplified compliance: Real estate developers now deal with a more transparent tax system, reducing the need to navigate multiple indirect taxes. Although input tax credit (ITC) rules have specific conditions, GST generally improves the ease of doing business in construction. 
   
• Market sentiment: The GST rate reduction on cement from 28 % to 18 % has been seen as a positive for the broader real estate market, often coinciding with stronger investor interest in construction-linked equities and builder stocks.

That said, the degree of impact on property prices depends on how developers integrate these cost savings into project economics and pricing structures over time.

Conclusion

The GST has simplified the tax system and reduced the overall tax burden on the cement industry, but compliance remains a challenge. The real estate industry is also impacted by GST, with current trends aimed at boosting demand, reducing construction costs, and simplifying the tax system.