ET NEWS

Mumbai: Cement prices are likely to fall by ₹25-30 per bag of 50 kgs in the near term as the recent price hikes taken by companies are rolled back to pass on the benefits of lower tax rates to consumers. These lower prices, though, are unlikely to trigger higher demand immediately given the inelastic nature of cement, analysts said.The GST council, on Wednesday, reduced rates for cement to 18% from 28% earlier. This is the first time that rates for the building material have been reduced after the introduction of the GST regime eight years ago."In the near term, the benefit will need to be passed on to customers," JM Financial Institutional Equities said in a report.In anticipation of a reduction in tax rates, companies had already hiked prices of cement by around ₹5-40 per bag across regions in the last week of August, with price hikes sharpest in southern India. Prices were hiked after they remained subdued through July and August due to higher-than-average monsoon rains and the festive period.The cost of cement typically accounts for about 12% of the construction cost for an individual home buyer. "Cement is a commodity; a lower GST rate will not lead to consumers buying excess volumes," Girija Shankar Ray, the lead analyst at YES Securities said in a recent report.

Mumbai: A 10 percentage-point reduction in the taxation for cement, the primary building material, is set to boost India's property sector, potentially lowering overall project costs for developers and homebuyers alike.At its 56th meeting, the government slashed the GST on cement, of which India is both the world's second-biggest consumer and producer, to 18% from 28%. Cement alone accounts for a significant portion of construction expenses, and the steep reduction in tax is likely to ease cost pressures across residential and commercial projects.Similarly, the rate on labour-intensive inputs, such as marble and travertine blocks, has been cut from 12% to 5%, while granite blocks will also attract only 5% GST compared with 12% earlier. Sand-lime bricks and stone inlay work too have seen their tax rate reduced to 5% from 12%. These cuts are expected to make finishing and structural materials more affordable, directly impacting construction budgets."The GST rationalisation is a festive bonanza for Indian consumers and a strategic boost for the economy. By enhancing purchasing power, stimulating consumption and helping contain inflation, this reform creates a multiplier effect that will propel India's GDP growth beyond 8%," said Niranjan Hiranandani, chairman, NAREDCO National.