GST rate cut on cement to boost infrastructure and improve viability

Experts predict that the GST cut on cement from 28% to 18% will boost infrastructure project viability, encourage PPP participation, and enhance the sector's competitiveness

The Goods and Services Tax (GST) Council’s decision to reduce the tax rate on cement from 28 per cent to 18 per cent, a long-standing demand of the industry, is likely to boost infrastructure and improve project viability across various sectors, according to industry leaders and experts.

 

“For a long time, cement has been taxed at one of the highest rates among essential building materials compared to sectors such as steel and other construction input materials. Lowering the rate to 18 per cent corrects this long-standing anomaly and ensures parity with other core materials. Moreover, a reduction in GST stands to enhance the competitiveness of the Indian cement industry by creating a fairer playing field with global peers,” said the Cement Manufacturers’ Association.

   

Cement is a foundational input material for infrastructure, and treating it more fairly in the tax structure is consistent with global practices. This change will likely boost consumption of this key building material, driving considerable infrastructure development, including affordable housing, the association added.

 

The rail industry also anticipates better compliance and smoother project execution for long-gestation infrastructure projects as a result of the tax rationalisation.

 

“By collapsing multiple slabs into a simplified 5 per cent and 18 per cent structure, the government has reduced ambiguity and ensured smoother compliance. This will be particularly beneficial for long-gestation infrastructure projects such as railways, where predictability and cost efficiency are key to planning and execution,” said Indrajit Mookerjee, Vice Chairman & Executive Director at Texmaco Rail & Engineering.

 

For the company, this step strengthens supply chain integration, lowers input cost pressures, and enhances financial clarity for projects. “Though businesses may face temporary challenges like stock revaluation and refund adjustments, the long-term gains far outweigh the transitional issues. We see this as a strong signal of the government’s commitment to ease of doing business and India’s ambition to create world-class transport and infrastructure solutions,” Mookerjee added.

 

According to former National Highways Authority of India Chairman NN Sinha, the rate cut will reduce the final material tax burden for infrastructure by about 10 per cent. “Such savings will make projects more viable, accelerate execution, and boost participation in Public-Private Partnerships,” said Sinha, who is currently the Managing Director of Rodic Digital and Advisory.

 

He added that reduced tax pressure will limit the incentive for informal procurement, strengthening transparency and compliance. “Furthermore, with simplified tax structures, we can better track investments and reduce reliance on informal procurement channels, enhancing transparency across the sector,” said Sinha.