Impact of the GST on the cement industry
Following China, the Indian cement industry produces the second-largest amount of cement worldwide. According to the Indian government’s 2017 Budget, which was presented by the finance minister, Mr. Arun Jaitley, these issues are of utmost importance, including expanding infrastructure, more affordable housing, and roadways. Therefore, it is projected that the cement industry will improve shortly. The real question is, will the GST’s introduction affect this anticipated growth?
Cement tax charges are quite complicated. For instance, different excise taxes and requirements apply to different types of cement depending on whether they are delivered in bulk form or packed form, as well as whether they are used for commercial or exchange purposes. The combined amount of the powerful charges, excise, and VAT is around 24-25%.
28% will be drawn to cement. GST, or a better tax charge, entails more fees for the infrastructure industry. Refractory cement, mortar, and concrete will be subject to an 18% tax (especially when used to build industrial furnaces, huge ovens, etc.). Board made of cement will appeal to 12% The three main raw materials used to make cement are limestone, coal, and electricity. These have the following tax costs:
Taxes on limestone are 5%. Coal is limited to 5%, which is a reduction from the earlier charge of 11.69%. Electricity is not covered by the GST. Regarding the royalty payments made by cement companies to national governments for limestone quarrying, nothing is mentioned. Coal is subject to a clean energy levy, but as GST does not always include it, it is no longer available as an entry credit. So even after GST is imposed, as was done previously, certain components will continue to be exempt from GST and may be shielded inside the cost of cement making.
Cement producers should breathe a sigh of relief since the GST gives the cement supply chain a boost. To avoid CST and foreign entry taxes, the majority of businesses maintain a few warehouses in several states. These warehouses frequently perform below their capacity, which leads to operational inefficiencies. Similar to other industries, the cement industry may also group its warehouses and retain them in locations where it is most advantageous (like Nagpur, a city of 0 miles), leading to operational efficiencies.
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