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The GST Council has approved a reduction in GST rates on cement from 28% to 18%, effective 22nd Sep’25. This is expected to lower cement prices by INR 25–30/bag. While we expect limited near-term demand elasticity, the move positions the industry favorably to enhance net realizations and margins over the medium to long term. Additionally, a marginal benefit will accrue from the release of working capital tied up in non-trade sales (~25–30% of industry volumes) and for the channel partners. On the cost side, the increase in GST on coal from 5% to 18% should be neutral, as input tax credit can be fully offset against GST liability. Importantly, the removal of the clean energy cess (INR 400/tn) is a positive, particularly for players in East and Central based players. On the other hand, GST rationalization may weigh on incentive income for industry participants.

• Impact on Pricing: The reduction in GST to 18% is expected to lower cement prices by INR 25–30/bag. In the near term, the benefit will need to be passed on to customers. However, we view the move as structurally positive over the medium to long term, supported by gradually improving demand and the industry’s ability to sustain price hikes. The cement sector typically operates under a dual pricing mechanism—companies bill dealers at invoice prices and subsequently extend price discounts, thereby determining the effective wholesale selling price (WSP).
• Impact on Demand: Near-term demand elasticity is expected to remain limited. Ahead of the revised rate implementation (effective 22nd Sep), dealers are likely to maintain lean inventory levels. However, rate cut is supportive for housing demand over the medium to long term.
• On Incentive Income: SGST incentive income is likely to decline by 30–35%, implying an EBITDA impact of ~2–4% (equivalent to INR 20–40/tn or INR 1–2/bag) for players currently availing these benefits. A key monitorable will be whether any relief measures are announced for extension of SGST benefits. In our view, clusters with higher dependence on incentives (such as Central India) could start witnessing relatively lower price volatility as the reduction in SGST benefits narrows pricing flexibility.
• On Working Capital: The GST reduction will help ease working capital lock-ups, particularly in non-trade sales (~25–30% of industry volumes) and across channel partners, thereby improving liquidity in the value chain. ? GST on coal has been raised from 5% to 18%: However, the impact remains neutral as input tax credit can be fully offset against final GST liability. Importantly, the removal of the Clean Energy Cess (INR 400/tn) is a positive, especially for Central and East India– based players with higher coal reliance. At an industry level (assuming ~15% coal usage), this translates into a benefit of INR 5–10/tn.

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