GST Cut to Ease Cement Prices, Boost Construction Sector: India Ratings and Research

India Ratings and Research (Ind-Ra) has projected a significant relief for the construction sector as the Goods and Services Tax (GST) overhaul is set to reduce cement prices. With the new tax structure coming into effect from September 22, cement will now be taxed at 18% instead of the existing 28%. This rationalisation is expected to bring down cement prices by approximately ₹30-35 per 50 kg bag, lowering overall construction costs for infrastructure as well as housing projects.

According to Ind-Ra, the move marks a “structural positive” for the cement industry, especially in the affordable housing segment where demand has been relatively weak in recent months. By passing on the benefits of the tax cut, cement companies are likely to make prices more attractive for consumers. This could help revive momentum in housing, infrastructure, and rural construction projects.

The report, however, highlights that cement demand growth may not accelerate immediately. Ind-Ra continues to maintain its annual demand growth forecast at 5-7% year-on-year, as the overall demand recovery is expected to be gradual. While rural demand remains resilient, aided by above-average monsoon conditions and rising real wages, urban demand continues to lag due to slower new housing launches.

The cement industry also witnessed strong capacity additions in the first quarter of FY26, with nearly 17 million tonnes commissioned out of a planned 75 million tonnes for the full year. Despite these expansions, industry-wide capacity utilisation stands at about 72%, slightly lower than last year.

Ind-Ra further noted that while the reduction in cement prices will benefit consumers, the net realisations for cement companies may remain range-bound due to intense competition. Yet, the softer pricing could encourage buyers to shift toward premium brands, which would benefit larger players in the market.

Overall, the GST rationalisation is expected to act as a much-needed catalyst for the cement sector, reducing costs for builders, easing the financial burden on homebuyers, and supporting the government’s affordable housing agenda.