- GST cut reduces consumer prices by around 8%
- Premium cement becomes more affordable, gains popularity
The Ministry of Finance introduced a GST cut on the Indian cement industry, reducing the GST rate from 28% to 18%, effective 22 September 2025. The move lowered the tax-inclusive price of cement by around 7.8%, translating into a reduction of around INR 25 per 50 kg bag at prevailing prices.
Cement manufacturers largely passed on the benefit of the tax reduction to consumers through lower prices, making cement more affordable. However, despite the price reduction, the GST cut has not led to a significant change in overall cement demand.
Demand response remains modest
Even though cement became cheaper, the GST cut did not lead to a major increase in cement demand. Industry demand grew by 8% y-o-y in FY’26, mainly because of higher infrastructure spending, housing activity, and a favorable comparison with the previous year.
Other factors such as government capital spending (capex), construction activity, progress of projects, availability of workers and seasonal trends continued to have a bigger impact on cement demand than the GST cut.
Industry demand growth is expected to slow to 6-7% in FY’27. This suggests that the GST cut has mainly helped make cement more affordable rather than becoming a major reason for higher cement sales.
Premiumisation emerges as key impact
The biggest visible impact of the GST cut has been on the type of cement consumers are buying. Since the final price has fallen, premium and higher-performance cement has become more affordable. This has encouraged some consumers to move from standard cement to better-quality products.
As per sources, consumers are increasingly looking at higher-quality cement because the overall purchase cost has come down. This means that some of the GST benefit is being used to buy premium products instead of simply increasing the total amount of cement purchased.
Manufacturers see limited direct margin benefit
For cement manufacturers, the GST cut has not directly increased their earnings because GST is collected from consumers and passed on to the government. Therefore, company margins continue to depend mainly on cement prices in different regions, demand and supply conditions, and the cost of raw materials and other inputs.
The benefit for consumers has also been partly reduced by higher production and transportation costs. Imported pet coke prices increased to around $170/t in September 2026 from about $120/t before the West Asian conflict. Polypropylene packaging costs also increased by around 50%. Higher freight and diesel costs have added further pressure on companies.
Outlook
The GST reduction is likely to continue supporting cement affordability and the use of premium products through FY’27. However, future growth in cement volumes will depend more on infrastructure spending, housing construction and real estate activity. At the same time, high fuel, transportation, and imported raw material costs could continue to put pressure on manufacturers’ profit margins, even if cement prices remain supportive.
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