The government has missed out on an opportunity to spur growth of the struggling cement and housing segment by putting the commodity at the highest tax slab of 28 per cent under GST, according to industry body CMA.
The Cement Manufacturers Association (CMA) also lamented that tax incidence on cement in India, which is the highest in Asia Pacific, has affected the health of the industry that is witnessing only 70 per cent of capacity utilisation due to low demand.
“On a 50 kg bag of cement costing Rs 300, Rs 180 is tax plus cost of logistics. This is also an industry which is very capital intensive with low margins. GST was an opportunity to provide relief to the industry but has been missed,” CMA president Shailendra Chouksey said.
While the industry is ailing, a lower tax rate on cement would have reduced prices which in turn could have benefited the housing segment -- the biggest consumer -- he added.
“Presently, housing for all is a big ticket item for the government and by reducing prices of cement a signal would have gone that it cares for the people,” Chouksey said.
At present, tax incidence on cement in India is around 60 per cent, he said, adding, “This is the highest in the Asia Pacific region, which has an average of 11.4 per cent. Even Sri Lanka, where rates are the second highest, it’s only 20 per cent.”
Commenting on the health of the industry, Chouksey who is a whole-time director of JK Lakshmi Cement said: “Before 2011, the cement industry had a double digit growth and since 2012, it declined to single digit.”
In 2016-17, there was one per cent decline, he said, adding “the CAGR growth of last five years was about 4 per cent while it was 8 per cent before the period”.
While the industry has a total capacity of 435 million tonnes (MT) per annum, Chouksey said only 280 MT was utilised for meeting domestic demand and 5 MT for exports
Chouksey, however, expressed hope that the industry could see growth considering the government’s focus on infrastructure development and housing development.