Cement stocks gain on potential GST rate cut; Analysts say sentiment positive for sector

India’s cement stocks are likely to see a sentimentally-positive impact after Prime Minister Narendra Modi promised next generation GST reforms by Diwali this year, during his Independence Day speech on Friday.On Friday, August 15, the Centre proposed moving to a simplified GST structure standard and merit — with special rates reserved only for select items. The proposal was sent to the Group of Ministers, set up by the GST Council, and is part of a broader plan for next-generation GST reforms.

Currently, cement attracts a 28% GST rate, which contributes to between ₹85,000 crore to ₹90,000 crore annually to the coffers of the government. A potential reduction to the rate can have a revenue impact of around ₹25,000 crore for the government.

Demand for cement is generally inelastic to GST rate changes.

Any reduction is expected to be passed on to the consumers, leading to:

• Lower cement prices.
• Potential boost in volumes and demand.

Shares of ACC, UltraTech Cement, Ambuja Cements, India Cements, Shree Cement, JK Cement, among other cement companies gained up to 4% on Monday, August 18. Analysts such as Jefferies, Citi, CLSA expect cement stocks to benefit from the potential GST rate cut.

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