The cement industry expects the government to reduce and simplify the tax structure. Currently, excise duty is levied in the form of 12 per cent ad valorem and ₹120-a-tonne specific.

Though the passage of GST Bill could remove the tax irritant, the industry expects the Budget to correct the anomaly by levying a fixed excise duty.

Siddharth Mehta, Partner - Indirect Tax, KPMG India, said the prevailing excise duty framework for cement is a combination of specific and ad valorem rates, which translates into high-duty incidence and a rather convoluted structure.

There is a case for simplifying the framework and reducingthe duties, given that cement is one of the critical elements for developing infrastructure. Also, to ensure seamless flow of credits, the industry would expect the Finance Minister to liberalise the credit regime and allow manufacturers and service providers the credit of duty paid on all construction inputs, including cement, Mehta said.

The annual tax revenue accrued by the government from the industry is estimated at about ₹35,000 crore, next only to tobacco, liquor and petroleum products. The total government levies and taxes on cement account for about 55-60 per cent of the ex-factory realisation price of cement. The economic slowdown in the past few years and the consequent drop in government spending on infrastructure projects have taken a heavy toll on the construction sector.

Amey Joshi, Associate Director, India Ratings and Research, said cement demand growth is at a decade-low of 2.2 per cent in the first nine months of this fiscal and major consumers of cement such as housing and infrastructure companies are under stress.

“We expect there should be higher allocation and spending in infrastructure sector. Any increase in taxes, duties and freight charges could put pressure on the industry, which is facing challenges due to low demand,” he said

Given the poor monsoon and marginal increase in minimum support price for agriculture products, the recovery in rural housing demand next fiscal appears to be weak. The demand for housing in urban regions may also be under pressure with high inventory level. Cement companies are hoping the infrastructure and road projects awarded by the government in the past 6-12 months will kick start demand.

Higher allocations for infrastructure sector, coupled with a focus on affordable housing, are expected to drive cement demand growth, going forward. The government impetus on affordable housing, smart cities, airports, and river-linking projects may also extend some support.

Shailendra Chouksey, president, Cement Manufacturers’ Association and Whole-time Director, JK Lakshmi Cement, said cement is one of the key infrastructure industries, but is not accorded similar status as other core sectors such as coal and steel. It is high time cement be stipulated ‘declared goods’, so that it is put on an equal footing with other core sector goods, he said.

Related Topics