GST relief hope for cement

The GST Council may take up a proposal to cut the tax rate on cement to 18 per cent from 28 per cent at its meeting later this month as the move may create more jobs and boost the economy ahead of the general elections.

By R. Suryamurthy
  • Published 10.09.18
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New Delhi: The GST Council may take up a proposal to cut the tax rate on cement to 18 per cent from 28 per cent at its meeting later this month as the move may create more jobs and boost the economy ahead of the general elections.

However, a dip in the August revenue collection could weigh on the council's decision. The council may not immediately cut the tax rate on the cement sector as it would have a revenue impact, sources said.

According to some estimates, the cut in the GST to 18 per cent could have a revenue impact of around Rs 1,000 crore per month. The GST Council is slated to meet for two days, beginning September 28.

Finance minister Arun Jaitley had earlier said that the GST Council may look to reduce the tax rates on cement, air-conditioners and large screen televisions as revenues improve.

The Cement Manufacturers Association has been pitching for the reduction in the GST as it would boost infrastructure spending. They had argued that a cut in the tax rate would help the government looking to create more jobs and boost the economy. Also, if the GST Council approves the proposal, it could be a shot in the arm for both homebuyers and builders.

The GST Council in July reduced the tax rate on around 30 items, including paints and white goods such as refrigerators and washing machines, to 18 per cent from 28 per cent, which had a revenue implication of about Rs 10,000 crore per annum.

The GST collections for August declined 1.7 per cent to Rs 93,960 crore from Rs 96,483 crore in the previous month because of deferred purchases by consumers.

However, analysts have argued that a cut in the GST rate for the construction sector will boost demand and increase revenue collection.

At present, while cement is taxed under the 28 per cent slab, many other items used in construction are in the 18-per-cent slab.

"A reduced GST rate on cement will help to bring down tax costs for not only individual buyers, but also for businesses as construction-related GST credits are typically not available. These benefits will further enhance if the GST rate on paints is also reduced to 18 per cent," Abhishek Jain, partner at EY, said.

The government has also taken several steps to boost the construction sector by relaxing rules that would enable more homebuyers to access the interest subsidy scheme.

Construction is a labour-intensive sector that contributes 8 per cent to the gross domestic product.