GST on Cement: 18% Rate, HSN Code, and Construction Cost Impact in 2026

The GST on cement in India was revised to 18% effective September 22, 2025 — a rate that many in the construction and real estate industry had been waiting for since the Goods and Services Tax was introduced in 2017. Whether you are a builder, a contractor, a small business owner, or a homeowner supervising construction, understanding the cement GST rate and the applicable HSN code is not optional. It directly affects project costing, input tax credit (ITC) claims, and GST invoice accuracy.

This post covers the current cement GST rate, HSN code classification, the rate change under GST 2.0, ITC rules, and the real-world impact on construction costs across India.

What is the GST rate of cement in 2026?

As of May 2026, the cement GST rate is 18%. This applies to all major types of cement traded in India, including Ordinary Portland Cement (OPC), Portland Pozzolana Cement (PPC), white cement, slag cement, and aluminous cement.

This rate replaced the earlier 28% slab, which had placed cement among the highest-taxed essential building materials in the country. The reduction was announced at the 56th GST Council meeting and notified by the Central Board of Indirect Taxes and Customs (CBIC), with effect from September 22, 2025.

For intra-state supplies, this 18% is split as 9% CGST and 9% SGST. For inter-state supplies, the seller charges 18% IGST. The mode of supply changes the tax components, but the total tax burden stays the same.

What is the HSN code for 18% cement?

The cement HSN code under India’s GST framework falls under Chapter 25 of the Harmonised System of Nomenclature, specifically under heading 2523. This heading covers hydraulic cements, including Portland cement, aluminous cement, slag cement, supersulfate cement, and similar cements, whether coloured or in the form of clinkers.

HSN Code 2523 — Raw Cement and Clinker

Using the correct HSN code on your tax invoices, e-way bills, and GSTR-1 filings is mandatory. A wrong digit in the HSN code can lead to notices, mismatches during ITC reconciliation, or penalties during GST audits.

Why Was the Cement GST Rate Reduced from 28% to 18%?

At the 56th GST Council meeting, the Finance Minister announced a sweeping restructuring of the GST rate framework under what is broadly referred to as GST 2.0 rate rationalisation. The earlier four-tier slab structure was simplified into a leaner two-slab system of 5% and 18%, with a separate 40% category reserved for luxury and sin goods.

Cement was moved from the 28% slab to 18%. This was one of the most consequential rate changes in the reform package.

Several factors drove this decision:

• Cement and steel together account for nearly 40 to 45% of total construction costs. A 10 percentage point reduction directly reduces project input costs at scale.
• The government’s push for affordable housing and the PM Awas Yojana targets required lower material tax burdens.
• Industry bodies, including the Cement Manufacturers’ Association, had long argued that taxing a core infrastructure input at 28% created a pricing anomaly compared to global peers.
• Reducing cement’s tax burden was also seen as a way to boost infrastructure project viability and encourage greater private sector participation in construction.

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How the New Cement GST Rate Affects Construction Costs

The practical impact of this rate change shows up clearly when applied to real project volumes.

Example: 1,500 sq ft residential home

A standard 1,500 sq ft home typically requires approximately 400 bags of cement. At a base price of Rs 350 per bag (pre-tax), the GST calculation shifts as follows:

For larger commercial or infrastructure projects running on thousands of metric tonnes of cement, this saving compounds significantly. The rate change does not automatically guarantee that cement prices in the market will drop proportionately, as manufacturers and distributors may adjust margins. However, businesses procuring cement as a taxable input can claim ITC, which effectively neutralises the GST paid during procurement.

Who Can Claim ITC on GST Paid on Cement?

This is a question that comes up often, and the answer matters for both cost planning and GST compliance.

When ITC Is Available

A GST-registered business can claim Input Tax Credit on cement purchased for use in the course or furtherance of business. This is straightforward when cement is:

• Used in construction of a business office, factory, or commercial property that is subsequently let out for taxable rent
• Purchased as an input by a contractor supplying taxable construction services
• Used in manufacturing where construction of the facility is integral to business activity

When ITC Is Not Available

Section 17(5) of the CGST Act restricts ITC in specific cases. ITC on cement is not claimable when it is used for:

• Construction of a residential home for personal use
• Construction of a property used for exempt supplies
• Works contract services involving the construction of an immovable property for own use (other than plant and machinery)

This distinction matters practically. A contractor billing a client for construction services can claim ITC on cement bought as an input. A homeowner building a personal house cannot claim ITC on the cement purchased.

Businesses should maintain proper purchase invoices with correct HSN codes and ensure the supplier has filed GSTR-1 so that the ITC appears correctly in GSTR-2B for matching.

Conclusion

The revised cement GST rate of 18% marks a meaningful step in making construction more affordable across India. For builders, contractors, and businesses that rely on cement as a core input, this translates to lower costs, better ITC utilisation, and simpler compliance under a rationalised two-slab structure.

Frequently Asked Questions (FAQs)

1. What is the current GST rate on cement in India?

The current GST rate on cement in India is 18%, effective from September 22, 2025. This applies to all major types including OPC, PPC, white cement, slag cement, and aluminous cement.

2. What is the HSN code for cement under GST?

Cement falls under HSN Code 2523. This heading covers Portland cement, aluminous cement, slag cement, supersulfate cement, and other hydraulic cements, whether coloured or in the form of clinkers.

3. When did the cement GST rate change from 28% to 18%?

The rate changed on September 22, 2025, as notified by the CBIC following the 56th GST Council meeting. This was part of the broader GST 2.0 rate rationalisation exercise.

4. What is the GST rate for cement bags?

The GST rate on cement bags in India is 18%. This rate applies to most types of cement, including OPC, PPC, and white cement.

5. What is the GST rate on Ready-Mix Concrete (RMC)?

Ready-Mix Concrete falls under HSN Code 6810 and attracts 18% GST. This rate aligns with the revised rate for cement and cement-based products under GST 2.0.

6. Is there a different GST rate on white cement?

No. White cement attracts the same 18% GST as ordinary Portland cement. It falls under HSN Code 2523 21 00 and is treated no differently from other cement types under the revised rate structure.

About the author

Mehul Jagwani

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Mehul is a seasoned content writer with a passion for simplifying complex accounting and GST topics. With a keen interest in entrepreneurship and business management, he specializes in creating informative and engaging content for themunim.com. His goal is to help businesses understand and implement accounting and GST software solutions effectively. When he's not crafting content, Mehul enjoys exploring new places and spending time with his Golden Retriever.