The reduction in goods and services tax (GST) on cement from 28 per cent to 18 per cent, effective September 22, 2025, improved affordability for end consumers, but its direct impact on cement demand volumes has been limited, industry experts said. However, companies and analysts said that it also made premium products more affordable, driving some shift towards those options.
“The reduction improved affordability for end consumers and led to a modest reduction in overall construction costs. However, cement demand continues to be driven primarily by underlying housing and infrastructure activity,” said vice-president and group head, corporate ratings, Icra. “Consequently, while the tax reduction has been supportive from an affordability perspective, its direct impact on demand volumes is likely to have been limited.”
The reduction had translated into an approximately 7.8 per cent reduction in the tax-inclusive price, equivalent to roughly Rs 25 per 50-kg bag at prevailing prices, according to assistant vice-president, Equirus Securities. Cement manufacturers passed the benefit on to consumers through lower cement prices, he said.
The pan-India average cement price for trade in September 2025 fell by Rs 23 per bag to Rs 345 per bag, mainly due to GST-related pricing adjustments, according to a report by BP Wealth. According to InCred Equities, the average cement price as of August 2026 was around Rs 360 per bag.
Maheshwari said the tax reduction had not resulted in a discernible structural acceleration in cement volumes. Cement demand remained driven primarily by infrastructure and real estate construction, government capex, labour availability, project execution, and seasonal factors such as the monsoon. “Hence, we believe that consumers may shift to higher premium mix due to decrease in prices,” he said.
Industry volumes grew around 8 per cent in the financial year 2025-26 (FY26), according to research analyst, Mirae Asset Sharekhan. However, he said the growth also reflected infrastructure spending, housing demand and a favourable base. He expects industry demand growth to moderate to around 6-7 per cent in FY27.
The GST cut also coincided with a shift in consumer preference towards premium products, according to companies. In its Q2FY26 earnings call in October 2025, UltraTech Cement’s chief financial officer Atul Daga, highlighting that there was no impact on profitability, had said, “GST 2.0 will definitely boost demand for premium cement because some people will be able to buy their aspirational brands due to a reduction in the cost of purchase.”
In its Q3FY26 earnings call in January 2026, Ambuja Cements’ chief executive officer said, “GST reduction only has helped in terms of shifting of the consumer preference towards the higher-quality, performance-driven products.”
On manufacturers’ realisations, he said, “As GST is a pass-through levy, the rate cut did not have any direct bearing on manufacturers’ realisations, which continue to be influenced by demand-supply dynamics and competitive intensity across regions.”
The consumer benefit from the GST reduction has subsequently been partly offset by higher input costs. According to him, imported petcoke prices rose from around $110 a tonne before the West Asian conflict to approximately $155-160 a tonne, while polypropylene packaging costs increased by around 50 per cent and freight rates also increased with higher diesel prices. Power and fuel account for roughly 30 per cent of cement manufacturing costs, he said.
Overall, the GST cut should be viewed primarily as an affordability and demand tailwind rather than a direct margin benefit. Much of the tax benefit has been passed on to consumers, while subsequent cost inflation has absorbed a meaningful part of the benefit for manufacturers.
Manufacturers attempted price increases of approximately Rs 10-15 per bag across several regions during March and April 2026, according to him. Some increases were rolled back due to seasonally weak monsoon demand, but prices have again started to rise from September onwards by around Rs 10-15 per bag across various regions.
He said cement industry margins had recovered in FY26, supported by improved pricing across several markets and relatively stable fuel, power and freight costs. However, she expects higher petcoke and coal prices, rising logistics costs and the impact of rupee depreciation on imported inputs to exert some pressure on margins in FY27.
