GST rate cut to lower cement prices by ₹30 to 35 per bag, reports Ind-Ra

The GST rationalisation will bring down the prices of cement by Rs 30-35 per 50 kg bag and lower the cost of construction, a report from India Ratings and Research (Ind-Ra) said.

Last week, the GST Council decided to overhaul the current GST regime into a two-slab structure -- 5 per cent and 18 per cent. From September 22, cement will be taxed at 18 per cent, instead of 28 per cent now.

The report said the revamp is a "structural positive" for the cement sector and could support demand in the affordable segment, which has been tepid in recent times.

Ind-Ra believes companies will likely largely pass on this benefit by reducing selling prices which will help lower construction costs for infrastructure and housing projects.

"With the rate cut likely to be passed on due to high competition, cement prices for consumers would soften while net realisations for cement companies may remain range bound," it said.

However, Ind-Ra maintains its cement demand growth forecast at 5-7 percent year-on-year as the demand pick-up across segments may not be immediate.

"The price reduction for consumers could also lead to some upgrading to higher-value brands, benefiting tier 1 players," it said.

Over the Indian cement demand, the report said it is likely to slow down to single-digit growth in the seasonally weak second quarter of FY26 as monsoon dampens construction activity.

After having a slow growth in FY25, the cement industry started this fiscal with a 6-7 per cent growth in the June quarter, driven by a healthy recovery in rural demand, supported by real wage growth and increased infrastructure spending.

Even in the second quarter, the industry had a "a good start with 12 per cent yoy volume growth in July 2025," it said.

"With monsoons dampening construction activity, net realisations are expected to decline sequentially over 2QFY26, though they should remain higher yoy. 1QFY26 marked the first instance of yoy increase in realisations since December 2023," it said.

Moreover, rural demand is expected to stay healthy, aided by an above-average monsoon and a fourth consecutive quarter of positive real wages growth.

"Conversely, urban demand is lagging, with new housing activity sluggish due to declining new launches in 1QFY26. While rate cuts could bolster urban demand in 2H, growth is likely to be weaker than in rural areas," it said.

Over the capacity utilisation, Ind-Ra said the cement industry witnessed significant capacity additions in 1QFY26, with around 17 million tonne commissioned out of the 75 MT planned for the full year.

"Recent acquisitions and pending ramp-ups of underutilised assets by large players pushed industry-wide capacity utilisation to nearly 72 per cent, a marginal yoy decline," it said.