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Key Points

A new report from Yes Securities claims cement companies strategically withheld a significant GST benefit from consumers. Following a GST reduction from 28% to 18%, prices dropped a mere Rs 5 per bag. The report suggests manufacturers retained most of the tax cut to protect their margins. This occurred amid a period of weak demand caused by monsoon disruptions and the festive season.

Key Points: Yes Securities Says Cement Firms Pocket GST Consumer Benefit

  • Cement prices fell just Rs 5 per bag despite the 10% GST rate cut
  • Companies adopted a weighted average pricing approach to limit the pass-through
  • Some firms hiked prices just before the GST reduction was implemented
  • Monsoon disruptions and subdued demand led companies to safeguard margins
3 min read

Cement firms were strategically trying to pocket GST benefit meant for consumers: Yes Securities

A Yes Securities report reveals cement companies retained most of the GST rate cut benefit, with prices dropping only Rs 5 per bag instead of the full tax reduction.

"Effectively, companies were strategically trying to pocket the GST benefit that was meant for consumers. - Yes Securities Report"

New Delhi, September 27

Cement companies were strategically attempting to pocket the GST benefit intended for consumers, noted Yes Securities in its latest industry update.

The report noted that following the government's decision to reduce the GST on cement from 28 per cent to 18 per cent, effective September 22, expectations were high for a meaningful price reduction at the consumer level.

However, channel checks revealed that all-India average cement prices dropped by just Rs 5 per bag on both a month-on-month and quarter-on-quarter basis.

With the rate cut implemented late in the month, companies adopted a weighted average pricing approach; however, the muted price correction suggests limited pass-through, as manufacturers appeared to retain a significant portion of the tax benefit to safeguard margins amid monsoon disruptions and subdued demand.

"As per our channel checks, all-India average prices were down by Rs5/bag on both a MoM and QoQ basis. Effectively, companies were strategically trying to pocket the GST benefit that was meant for consumers. However, the net impact was relatively muted compared to the actual benefit," Yes Securities report added.

Ahead of the GST rate cut on cement, companies attempted a price hike from the last week of August to the second week of September. A few pockets were able to implement a hike of Rs10-15/bag in the last week of August, except Hyderabad, where prices rose by Rs30/bag in the first week of September.

Overall, the effective price hike during 1st-21st September was Rs 10/bag in some states in the eastern and western regions.

"Companies that took a price hike before the GST cut were able to pass it on to consumers, while the others remained at base price with 18 per cent GST," the report added.

On a QoQ basis, allIndia average prices were down by 1.3 per cent, led by a major decline in the southern region (2 per cent), followed by the western (1.5 per cent), eastern (1.3 per cent), and central (1.2 per cent) regions, whileprices in the northern region remained flattish.

"We also believe it is highly unlikely that any price hikes will occur in the next two months. However, our channel checks suggest that companies may attempt a hike post Diwali," the report added.

According to the report, on the demand front, the second quarter of Financial Year 2026 witnessed subdued demand due to the early monsoon impact, coupled with the festival season, no new construction on account of religious beliefs, sand mining issues, and some states being flooded due to continuous heavy rain.

- ANI

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Reader Comments

P
Priya S
We're building our house in Chennai and were hoping for some relief. The Rs 5 reduction is a joke when you consider how much cement we need. Companies should be more responsible towards consumers.
M
Michael C
While I understand the frustration, companies do face genuine challenges during monsoon. The weighted average approach seems reasonable given the timing of the GST cut. Maybe we need to give it more time.
A
Ananya R
The timing before Diwali is crucial for construction. If companies hike prices post-Diwali as predicted, it will hurt middle-class home builders. Government should monitor this closely 👀
S
Sarah B
Interesting analysis. The regional variations show how complex pricing is in India. Southern region seeing 2% drop while North remains flat - suggests local market dynamics play big role too.
V
Vikram M
GST reduction from 28% to 18% should have resulted in at least Rs 30-40 reduction per bag. Rs 5 is insulting to consumers. Government needs to take strict action against these companies.
K
Kavya N
As someone working in construction industry, I can confirm the demand has been weak due to rains and festivals. But that doesn't justify companies keeping the tax benefit. Hope prices normalize after Diwali 🤞

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