28% GST on cement: Nirmala hints rethinking, green transition; Kashmir cement industry has mixed reactions

8 February 2023

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Srinagar, Feb 7: As Finance Minister Nirmala Sitharaman on Tuesday indicated that the government could be open to considering a reduction in the goods and services tax (GST) on cement, Kashmir’s cement industry has expressed mixed reactions, considering her hint that the industry may soon have to transition to green production system to meet the country’s Sustainable Development Goals (SDG) commitments.

At a session with members of the Confederation of Indian Industry (CII) in New Delhi, the finance minister, responding to a recommendation, said she would have a fitment committee look into the existing 28 per cent GST rate on cement – a critical input in physical infrastructure development and in growth and modernisation of the housing sector.

“On GST for cement, your point is taken. I will have the fitment committee look at it,” Sitharaman told the industry body members. However, Ms Sitharaman also raised environmental concerns about the cement manufacturing processes in the country and highlighted India’s commitments to the sustainable development goals (SDGs) on environmental protection.

Two major cement manufacturers, based in Khanmoh-Khrew belt near Srinagar, told Ziraat Times that the decision, if implemented, could have adverse production impact on Kashmir-based industries as any raw material and production line changes could result in higher production costs and a dip in revenues.

”Kashmir’s cement industry is already reeling under challenges, especially the competition from big brands after the removal of the toll tax system at Lakhanpur. But we, nevertheless, welcome the approach to re-think the 28% GST on cement, which is surely on the much higher side now”, Managing Director of a leading cement brand told Ziraat Times, requesting not to be quoted by name.

Pertinently, Kashmir’s Khanmoh-Khrew belt has become a major cement production belt for at least seven cement brands having their production centers in the area, including Saifco Cements, Khyber Cements, Arco Cements, Tramboo Cements, Valley Cement, ICC Cement, Cemtac Cement and others. Their cumulative production takes care of a significant part of the demand in Kashmir, Jammu and even in the Ladakh region.

At Tuesday’s CII meeting, what was striking, however, was the finance minister once again exhorting Indian industry to make sure all its output is compliant with sustainable development goals (SDGs). “This would be essential for negotiating non-tariff barriers arising out of environmental concerns around the world, should they crop up,” she said.

At the same time, she commended the industry for starting to think more holistically and not just be concerned with their own sectors. “Post-Covid, industry is looking at India more holistically… I find this shift healthy,” Sitharaman said.

“Indian industry has to come up with ideas, talk to the government. Lift up our thinking,” Sitharaman said, advising industry to make sure their products do not face non-tariff barriers. This, she said, was the challenge in the post-Covid world.

“The industry has to be SDG compliant, will have to produce green goods and ensure that inputs are green compliant and guided by green considerations. You will have to make the transition from using fossil fuel to green fuel. All this will have to happen at this time and not be delayed,” she said.

Without naming the Carbon Border Adjustment Mechanism (CBAM), agreed upon by the European Union, she had said there were countries that wanted to fund their transition from not so green to green production of material for items like steel by raising tariff walls against countries that sent their products as a matter of normal export.

If implemented, Kashmir’s cement industry will also be required to make a transition to green production technologies, the cost, raw material and production implications of which, like for all major brands of the country, remain hitherto largely unknown, a senior executive of a cement producer based in Srinagar told Ziraat Times.