GST on Cement in India: Tax Rate and Its Impact on Construction Costs

Cement is a key ingredient in construction—whether you’re building a home, a commercial complex, or infrastructure. With the implementation of the Goods and Services Tax (GST), the tax structure for cement has been streamlined, but it remains one of the highest-taxed items. In this blog, we’ll break down the GST rate on cement, relevant HSN codes, how it affects pricing, and what it means for real estate and infrastructure projects.

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    GST Rates

    What is the GST Rate on Cement?

    Cement attracts a GST rate of 28%, which is among the highest slabs under the current tax regime. This rate applies to all types of cement, including:

    Type of Cement GST Rate Remarks
    OPC, PPC, White Cement 28% Highest GST slab
    Clinker (raw material for cement) 28% Same as finished product

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    HSN Code for Cement

    Cement and cement products fall under HSN code 2523, which includes:

    Product Description HSN Code GST Rate
    Portland Cement (incl. white cement) 2523 28%
    Cement Clinker 2523 28%
    Hydraulic Cement (non-Portland) 2523 28%

    HSN codes must be mentioned on invoices and GST returns for accurate tax classification.

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    How Does GST Impact Cement Prices?

    Let’s say the base price of a 50kg bag of cement is ₹350.

    • GST @28% = ₹98
    • Total Cost per Bag = ₹350 + ₹98 = ₹448

    This significant tax burden raises construction costs, especially in bulk procurement. Since cement is used in large quantities, the total impact on a project’s budget can be substantial.

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    Input Tax Credit (ITC) on Cement

    Businesses registered under GST can claim ITC on the GST paid on cement if:

    • The cement is used for business purposes (e.g., construction of a factory)
    • A proper tax invoice is available
    • The supplier has filed returns

    However, ITC is restricted if the cement is used for constructing an immovable property (e.g., a building for self-use), as per Section 17(5) of the CGST Act.

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    GST Impact on Real Estate and Infrastructure

    Cement being taxed at 28% increases the cost of construction materials. This affects:

    • Affordable housing projects – Higher input costs reduce margins
    • Infrastructure development – Roads, bridges, etc., become costlier
    • Contractor pricing – Final project bids rise to accommodate higher tax

    While developers can claim ITC, homebuyers indirectly bear the burden of higher cement prices in property costs.

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    Pre-GST vs Post-GST Comparison

    Before GST, cement was taxed under multiple heads:

    • Excise Duty: ~12.5%
    • VAT: ~12–15%
    • Total effective tax: 25–27%
    • Under GST, it’s a flat 28%, which simplifies taxation but does not reduce the overall tax burden.

    Unique Features of BUSY Accounting Software for the Cement Industry

    • Batch-wise inventory management for different grades of cement.
    • Real-time Shelf-life tracking across multiple godowns and depots.
    • Customisable rate lists for wholesale, retail, and project-based pricing.
    • Vehicle and transportation tracking integrated with sales invoices.
    • Multi-unit stock handling (bags, tons, kgs) with unit conversion.
    • Automated challan and invoice generation for bulk orders.
    • Approval workflow for dispatch orders and pricing overrides.
    • Loading and unloading expense tracking at each transaction level.
    • Centralised reporting for stock movement and sales analysis.

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    Final Thoughts

    Cement continues to be one of the highest-taxed items under GST, which adds significantly to construction and infrastructure costs. For real estate developers, understanding how GST and ITC apply to cement can help manage project finances. For individual buyers or small contractors, it’s important to factor in GST while planning budgets.

    Frequently Asked Questions (FAQs)

    • What is the current GST rate on cement?
      Cement is taxed at 28% under GST.
    • Can builders claim ITC on cement?
      Builders can claim ITC only if the cement is used for business purposes and not for construction of buildings intended for personal use.
    • Why is cement taxed so high?
      Cement is classified as a luxury or high-revenue item, hence placed in the highest tax bracket.
    • Is GST applicable on cement transportation too?
      Yes. Transportation services attract 5% or 18% GST, depending on the service type.
    • Has the GST rate on cement changed since 2017?
      No. Cement has consistently remained in the 28% slab since GST was introduced.
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