New Delhi: Rationalisation of GST will reduce cement prices by Rs 30-35 per 50 kg bag and also reduce construction costs, a report by India Ratings and Research (Ind-Ra) said.
Last week, the GST Council decided to introduce two slabs – 5 percent and 18 percent – in the existing GST regime. From September 22, cement will be taxed at 18 percent instead of 28 per cent.
The report said the change is “structurally positive” for the cement sector and could boost demand in the affordable category, which has been weak in recent times.
Ind-Ra believes companies will pass on this benefit largely by reducing selling prices, which will help reduce construction costs of infrastructure and housing projects.
“With the rate cut benefits likely to be passed on to consumers due to higher competition, cement prices for consumers will be lower, while net realisations of cement companies may remain range-bound,” the report said.
However, Ind-Ra has maintained its cement demand growth forecast at 5-7 percent year-on-year, as an immediate pick-up in demand across sectors is unlikely.
“Reduction in prices for consumers may also lead some companies to move to higher-value brands, benefiting tier 1 companies,” the report said.
On Indian cement demand, the report said growth is likely to decline to single digits in the seasonally weak second quarter of FY26, as construction activity slows due to the monsoon.
After slow growth in FY25, the cement industry started this fiscal with a 6-7 percent growth in the June quarter, led by a healthy recovery in rural demand, real wage growth and increased spending on infrastructure.
In the second quarter too, the industry “started off well with 12 percent annual growth in July 2025,” it said.
“With construction activity subdued due to the monsoon, net receipts are expected to decline sequentially in the second quarter of FY26, although they will remain higher year-on-year. The first quarter of FY26 is the first instance of year-on-year growth in receipts since December 2023,” it said.
Further, rural demand is also expected to remain healthy due to a better-than-average monsoon and positive real wage growth for the fourth consecutive quarter.
“In contrast, urban demand is lagging, with new housing activity sluggish due to a decline in new launches in Q1 FY26. While rate cuts could boost urban demand in the second half, growth is likely to remain weaker than in rural areas,” it said.
In terms of capacity utilisation, Ind-Ra said the cement industry witnessed significant capacity addition in Q1 FY26, and about 17 million tonnes of capacity was commissioned out of the 75 million tonnes planned for the full year.
“Recent acquisitions by large players and pending expansion of underutilised assets pushed industry-wide capacity utilisation to around 72 percent, a marginal decline year-on-year,” it added.
