GST Rate Reduction on Cement Expected to Lower Infrastructure Project Costs and Boost Economic Growth

The reduction of GST on cement from 28% to 18% is anticipated to lower infrastructure project costs and enhance cash flow, according to industry experts. The GST Council made this decision during its 56th meeting, with the new rate effective from September 22. This move aims to stimulate infrastructure development and economic growth, as noted by Kavita Shirvaikar, Managing Director of Patel Engineering.

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A spokesperson from IRB Infrastructure Developers highlighted that the reduced GST on essential inputs will significantly benefit the road sector. Lower construction expenses and improved cash flows are expected to strengthen developers' financial health. Vimal Kejriwal, Managing Director of KEC International, added that the GST cut will unlock working capital and improve cash flow efficiency, speeding up project timelines.

Impact on Construction and Agriculture

Sorab Agarwal, Executive Director at Action Construction Equipment Limited, stated that the GST reduction on building materials will ease input costs and accelerate project execution. This change is expected to provide much-needed momentum to the construction sector. Additionally, reducing GST on agricultural equipment from 12% to 5% is seen as a significant step benefiting farmers and the rural economy.

Nagendra Nath Sinha, Managing Director of Rodic Digital & Advisory, explained that cement and steel account for 40-45% of project costs. The GST reduction will decrease material tax burdens by about 10%, making projects more viable and accelerating execution. This change is also likely to boost participation in public-private partnerships.

Long-term Benefits for Renewable Energy

Ashish Suman, Partner at JSA Advocates & Solicitors, mentioned that these tax cuts could support India's decarbonisation goals in the medium term. The reduced GST rates will make renewable energy parts production and supply more cost-effective. This is expected to increase investment and manufacturing activities in the renewable energy sector.

The government's decision to lower GST on critical construction materials like cement is seen as a catalyst for economic growth. Industry leaders believe it will stimulate private sector capital expenditure and attract more investments into infrastructure development.

With inputs from PTI