India’s 460-mil­lion tonne ce­ment sec­tor is dis­ap­pointed at be­ing kept in the 28 per cent goods and ser­vices tax (GST) bracket even af­ter the lat­est re­jig in rates. The hope was for be­ing repo­si­tioned in the 18 per cent bracket, along with other build­ing ma­te­rial seg­ments.

These high hopes were mainly on the back of the cen­tral govern­ment’s big push on in­fra­struc­ture de­vel­op­ment and af­ford­able hous­ing. They be­lieved as ce­ment is an in­dis­pens­able build­ing ma­te­rial, the re­lief sought would come.

How­ever, ce­ment con­tin­ues in the high­est tax bracket, “along with lux­ury items such as wash­ing ma­chines and air con­di­tion­ers”, says Shailen­dra Chouk­sey, pres­i­dent, Ce­ment Man­u­fac­tur­ers’ As­so­ci­a­tion (CMA). “This is a dis­ap­point­ment for the en­tire in­dus­try... ce­ment is in­te­gral to the govern­ment’s key schemes such as Hous­ing for All, Swachch Bharat and build­ing of other in­fra­struc­ture projects that are fun­da­men­tal for build­ing an India for the fu­ture.”

His­tor­i­cally, ce­ment has been a highly taxed com­mod­ity. Com­pa­nies in the sec­tor have long been de­mand­ing this be ra­tio­nalised. “It is quite un­fair to be in the high­est tax bracket. How could this com­mod­ity share the same space as lux­ury goods in the tax list?” asks the ex­ec­u­tive vicepres­i­dent of a large South India-based ce­ment en­tity.

Says H M Ban­gur, man­ag­ing di­rec­tor of Shree Ce­ment: “I do not think there will be any im­pact on the sec­tor with this re­ten­tion. From July 1, when the GST came into force, we were men­tally pre­pared for 28 per cent. Hav­ing said that, a tax slab of 18 per cent would have been a pos­i­tive sur­prise. Af­ter all, who does not want to pay less tax?”

“Ra­tio­nal­i­sa­tion in the tax rate would have not only lifted this in­dus­try from the de­pres­sion phase it is pass­ing through but sent pos­i­tive sig­nals of the govern­ment’s in­tent to bring back the econ­omy to a faster pace of growth,” added the CMA. The ce­ment in­dus­try’s av­er­age an­nual growth for the past five years has been four per cent. In 2016-17, it was mi­nus 1.2 per cent, for the first time in over a decade. And, in the first six months of 2017-18 (April-Septem­ber), the sec­tor's growth rate was a neg­a­tive two- odd per cent. The hope is that de­mand should pick up, due to bet­ter mon­soon. Even so, growth for the full year might be less than two per cent.

“There is a vis­i­ble down­fall in ce­ment de­mand growth. Though govern­ment spend­ing on in­fra­struc­ture is good, giv­ing a much needed push, de­mand from or­gan­ised con­struc­tion con­tin­ues to re­main poor. With RERA (the new and strin­gent law on the real es­tate sec­tor) com­ing into force, the con­struc­tion sec­tor is hit. In the next one to two years, (the ex­pec­ta­tion is that) growth will be back to nor­mal,” said Ban­gur.

Shares of ce­ment com­pa­nies on the stock ex­change have been trad­ing strongly over the past year. They are now 4045 per cent higher than their 52-week low. This is be­cause they're ex­pected to be a ma­jor ben­e­fi­ciary of the govern­ment’s in­fra­struc­ture push.

His­tor­i­cally, ce­ment has been a highly taxed com­mod­ity. Com­pa­nies in the sec­tor have long been de­mand­ing this be ra­tio­nalised

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