Representational image | Photo Credit: BCCL

New Delhi: Given the Narendra Modi-led government’s focus on infrastructure projects, including Housing for All, many industry watchers were expecting a cut in the goods and services tax (GST) rate to 18 per cent on cement, a hope dashed when the GST Council at its meeting on Saturday retained the 28 per cent tax on the sector.



Many analysts say Saturday’s GST council decision may have come as a dampener both homebuyers and builders. They are of the opinion that a reduction would have pushed infrastructure spending to generate more jobs and boost the economy as well.

It may be noted that the GST slab was tax neutral for cement companies because during the pre-GST regime, indirect taxes levied added up to around 28 per cent or a little higher. Currently, cement is taxed under the 28 per cent slab, many other items used in construction are in the 18-per-cent bracket.





.@GST_Council in its 31st #GSTCouncilMeet has slashed rates of 22 items bringing them out of the 28% tax slab. In a relief for consumers - small TVs, computers, video games & movie tickets will cost cheaper. Cement and housing related items were not discussed. Listen in! pic.twitter.com/pjyio4JDHS — ET NOW (@ETNOWlive) December 22, 2018

“The profitability of Indian cement companies should recover from the recent lows, but the pace will be slower than expected, according to ET which cited a Morgan Stanley report.



It seems that a drop in the GST revenue collection may have impacted the Council decision. The collection in November dipped to Rs 97,637 crore, lower than Rs 1 lakh crore collected in October. In the first eight months (April-November) of the current fiscal, the Centre has collected over Rs 7.76 lakh crore from GST. The 2018-19 Budget had estimated annual GST collection at Rs 13.48 lakh crore, which means a monthly target of Rs 1.12 lakh crore.



However, there is one school of thought that argues that a reduction in the GST rate for the cement sector would bolster demand and increase revenue collection.

After the Council meeting, Finance Minister Arum Jaitley clarified that the impact would have been Rs 33,000 core had the GST rate on cement and automobile components been reduced to 18 per cent. He mentioned that six items have been removed from the 28 per cent tax bracket.

Meanwhile, on Tuesday, Prime Minister Narendra Modi had promised 99 per cent of goods and services will be brought in the 18 per cent or less GST slabs and the highest bracket limited to just a few select luxury and sin items.