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GST On Cement: Impact and Effect of GST on Cement industry

Goods and Services Tax (GST) is compulsory for businesses that supply goods and whose annual turnover is more than INR 40 lakhs. Every cement company will have to register under GST as they will come under the new threshold limit set by the government. As we all know, India is the second-largest producer of cement in the world. In the upcoming years, there will be a huge boost in the cement industry. The Indian government is looking forward to developing infrastructure, reasonable housing, and roads as said in the 2017 budget. 

When it comes to taxes on cement, it varies according to the types of cement, the way the cement is supplied like bulk or packets, and industrial or trade purposes, etc.

Many of you might wonder if there is any impact on the cement industry because of the GST. Of course, there are positive impacts for the cement industry when the GTS is implemented. 

However, the rate for the cement can be increased which will also result in an increased rate for infrastructure and construction. Read this guide to know more about cement GST rate and the impacts and effect of it. Moreover, you will get to know how to calculate GST with the actual formula.

What is the cement GST rate?

The GST rate on cement is set to 28%. This will surely be responsible for increasing the cost of the infrastructure sector. Before the implementation of the GST, the manufacturers of cement had to pay several rates and excise duties. Before the new GST system, the VAT and the excise duties came up to 24 % to 25%. But once the GST is implemented, the taxes will be paid as one amount.

How cement GST rate affects the cement industry?

The raw materials mainly used for making cement are limestone, coal, and electricity. The tax rates on these items are: limestone – 5%, coal – 5%, and electricity is outside the purview of GST. There are many positive impacts of GST on the cement industry. The GST on transportation is reduced to 5% if it is separately charged. Moreover, the clean energy cess has been imposed on coal and is not available as an input credit. Regarding the royalty which is paid by the cement companies to the state government for quarrying limestone is not mentioned. Below you can see how GST has positively affected the cement manufacturers in warehousing and in reducing the transportation cost.

Warehousing

Under the GST, the supply chain management of cement will boost and it is a great sigh of relief for the manufactures. A majority of the cement companies maintain several warehouses across different states to avoid CST and taxes for stare entry. Out of these numerous warehouses, many warehouses usually operate below their capacity, leading to inefficiency in the operations. But when the new GST regime was introduced, the cement manufacturing companies are not forced to uphold multiple warehouses across states. This makes it easier and profitable for the manufacturers as they can choose the area where they want to maintain the warehouses and can also increase the operational efficiency. They can choose to put up a warehouse that is easily accessible and can also choose the best state or area where the transportation of the cement can be done easily and quickly without much difficulty.

Transportation Cost

Before the GST regime, the transportation cost of the cement was very high. Usually, the cement manufacturers build their warehouses near limestone quarries so that it is easy for the production of cement. But the transportation cost increased a lot as the warehouse was far away from the city. But now the logistics industry is going to be revamped with the GST and the transit time will be reduced as the vehicles used for transporting the cement will have to spend only less time at checkpoints. Due to this, the manufactures can save a lot of money on transportation.

Taxes became less complicated

Earlier, the cement manufacturers had to pay multiple excise duties as there was a separate rate and duties applicable to various types of cement and the way of selling it and its purpose. Now under the GST, the manufacturers will have to only pay a single tax which is set to 28%. This helps in reducing the time of calculating the GST and also other processes related to the same.

How to calculate cement brick’s GST rate?

The GST rate on cement bricks comes in the range of 5% to 28% and it is based on the nature of the bricks. Let us see different GST rates of various types of bricks here.

  • Bricks used for building and bricks of fossil meals are set to 5% GST.
  • The GST rate for multicellular or foam glass that available in blocks, panels, shells, plates is 28%.
  • 5% GST charged for roofing and earthen tiles.
  • Bricks made of cement, artificial stone, or concrete such as brick flagstone, building blocks, and cemented bricks and also prefabricated components for the construction of the building will attract 28% GST.
  • Refractory bricks and other ceramic goods attract a GST of 18%.

Since all the taxes come under GST, the calculation becomes easy as the GST rate for the cement industry is fixed to 28%, and manufacturers do not have to calculate the excise duties and other taxes separately. There is a formula to calculate the GST and it is given below for your reference.

To add the GST, you must use the following formula.

GST Amount = (Original Cost x GST %) / 100

Net Price = Original Cost + GST Amount

To Remove GST you must use the formula mentioned below.

GST Amount – Original Cost – [Original Cost x {100/(100+GST%)}]

Net price – Original Cost – GST Amount

For example, assume that you have sold the cement for Rs.3000 and GST applicable is 28%.

The net price of the products is Rs.3000 + 28% of Rs. 3000

So the amount will come as Rs.3000 + 840 – Rs 3840

FAQs related to cement GST rate 

  1. Are there any GST calculators that we can use?

Yes, you can easily find a GST calculator online that can make your calculation extremely simple. Today there is an easy alternative to it. Yes, myBillBook app. You can download this app to your phone and generate GST invoices in just a few steps. Use the GST calculator to calculate your GST.

  1. Who can use a GST calculator?

Any buyer, manufacturer, and wholesaler can use the GST calculator.

  1. How can a manufacturer use the GST calculator?

Open the GST calculator and enter the cost of production or cost of good along with profit ratio percentage and the rate of the GST. Click on calculate button if you using an online calculator and it will give you the result of the total cost of production, SGST, CGST, and the total tax.

  1. As a buyer, how can I calculate the GST using the GST calculator?

You should add the net rate before the GST amount and then enter the rate of GST. The aggregate cost of production, CGST, SGST, and the total tax will be calculated.

  1. How will the price of the cement decrease?

Only if the cement manufacturers pass their savings to the consumers, there will be a reduction in the costs for the end-consumer. Otherwise, the price of the cement will increase temporarily.

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