GST cut on cement to 18% lowers retail prices by ₹25–30 a bag.
Brokerages see pricing discipline, better margins, and working-capital relief.
Demand growth could accelerate to 8–10% in FY27–28, supported by improved infra and housing demand.
Cement stocks showcased a largely positive trend on September 4 after the Goods and Services Tax Council slashed taxes on the commodity to 18% from 28% that it had held on for long, finally meeting the industry’s longstanding demand.
Shares of Ultratech Cement, Ambuja Cements, ACC, Shree Cement and others rose 2-3% as investors brewed hopes of both demand tailwinds and improved profitability once the new rates come into action on September 22.
The move shifts the sector out of the highest GST bracket into a more moderate band, covering all major cement categories. Analysts believe the shift could cut retail cement prices by 7.5-8%, translating into a reduction of roughly ₹25–30 per bag. This reduction may help spur a revival in demand that has been sluggish amidst an early monsoon season.
Lower costs are also expected to seep into the real estate and infrastructure sectors, potentially making homes more affordable and easing project budgets.
Brokerages largely viewed the tax cut in positive light. Global investment firm Jefferies touted the decision as a ‘long-awaited’ step that structurally improves the sector’s dynamics.
Jefferies expects limited immediate demand elasticity but sees the new framework helping cement makers enforce pricing discipline, an area where the industry has often struggled. The firm also flagged that with GST on coal raised to 18% from 5%, companies can now claim full input tax credit on the key raw material, offsetting the higher levy.
Motilal Oswal Financial Services echoed this view, adding that the rate cut could stimulate demand and unlock working capital, particularly in non-trade sales that account for nearly a third of industry volumes.
JM Financial added that the removal of the clean energy cess of ₹400 per tonne should ease cost pressures, especially for producers in the East and Central regions. While input incentives may narrow for some firms, the overall net effect is seen as favourable.
Choice Broking set out a more detailed roadmap, estimating that industry demand growth could accelerate to 8-10% by FY27-FY28, up from the current 6-8 percent range. It expects companies to benefit from a pricing tailwind of ₹60-100 per tonne over the same period, aided by stronger consumption and better operating leverage.
For the real estate and infrastructure sectors, the tax cut offers a breathing room. Developers could pass on some of the savings to buyers, which would help revive housing demand, while infra players may find cost efficiencies at scale. Both sectors are critical consumers of cement and have long argued that a 28% tax on a core input distorted their price economics.
Reduced GST on construction materials like cement can reduce construction costs by as much as 3-5%. “Developers, especially those engages in creating affordable housing, will get major relief in terms of cash flows and margins,” said Anuj Puri, Chairman of ANAROCK Group.
ANAROCK Research reveals that the affordable housing category (below Rs 40 lakh) has seen its share of total sales decline from 38% in 2019 to just 18% in 2024. The share of new supply dropped even more dramatically from 40% in 2019 to just 12% in H1 2025. “The reduced construction costs, if passed on to homebuyers, can boost demand in these segments,” Puri believes.
Meanwhile, Puri also remarked that these reforms were especially positive news for affordable housing. “India currently has a shortfall of nearly 1 crore budget homes in urban markets, and this number could rise to 2.5 crore by 2030 without focused interventions. These GST reforms bring lower construction costs and improved ease of compliance, which can go a long way towards reversing this trend making homeownership more accessible to middle-class families,” he added.
The GST overhaul also signals a policy nudge towards reviving consumption at a time when investment-driven growth is reeling under pressure. By easing construction costs, policymakers appear to be betting on the multiplier effect of housing and infrastructure activity to ripple through the economy.
