GST Cut on Cement Brings Little Relief as Prices Drop Marginally

The much-anticipated Goods and Services Tax (GST) reduction on cement, effective September 22, has failed to translate into meaningful relief for consumers. While the government reduced the GST rate on cement from 28% to 18%, industry data shows that the all-India average price declined by just ₹5 per 50-kg bag, leaving expectations largely unmet.

According to a report by Yes Securities, cement manufacturers appear to have absorbed a significant portion of the tax benefit to safeguard their margins. The muted price correction reflects the industry’s cautious stance amid seasonal challenges, including subdued demand due to monsoon disruptions, sand mining issues, and flooding in certain states. Additionally, the festival season and religious restrictions on new construction further slowed demand in the second quarter of FY26.

Interestingly, companies had already attempted price hikes in late August and early September, just before the GST cut came into effect. In some markets, prices were raised by ₹10–15 per bag, while in Hyderabad, prices surged by as much as ₹30 per bag. As a result, the effective reduction after the GST cut was limited, as the earlier hikes offset much of the expected consumer benefit.

Regionally, prices fell the most in South India, with a decline of around 2%, followed by the western (1.5%), eastern (1.3%), and central (1.2%) regions, while northern markets remained relatively stable. On a quarterly basis, all-India average prices were down by about 1.3%.

Looking ahead, industry experts believe that price hikes are unlikely in the immediate two months, but companies may attempt to increase prices post-Diwali when demand is expected to pick up. For now, the GST cut has provided limited relief to consumers, while cement companies continue to prioritize margin protection over passing on the full benefit.

This development highlights the complex interplay between government policy and market realities, showing how tax reforms may not always directly benefit end-users in industries facing seasonal disruptions and demand fluctuations.