Himachal Faces ₹1000 Crore Loss Due to GST Cut on Cement: Minister Dharmani
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Shimla Sept 27
Backing the State Government’s decision of increasing the price of cement to rupees five per bag, the Technical Education and TCP Minister Rajesh Dharmani stated that it was necessary to rationalize the rates as has badly hit the State below its belt. The State which was already suffering from the brunt of disasters suffered direct loss of around Rs. 1000 crore due to decrease in rates by GST Council.
The Minister said that during the Value Added Tax (VAT) regime, the state revenue was growing at approximately 16% prior to GST. After June 2017 the revenue has fallen to mere 7 to 8 percent after rationalization of GST, the consumption-based taxation system.
He said that this decision of the Union Government is to benefit the big States where consumption is more, but the states like Himachal, Jammu and Kashmir, Uttarakhand and North Eastern States are the worst sufferers. He stated that the GST council had assured that the hill States like Himachal Pradesh will be compensated for the loss and will provide the compensation cess till the revenue growth reached 16 percent as was during the VAT regime, but in June 2022, this compensation cess was stopped and the State was left financially with less resources to generate revenue from.
The Minister stated that the State has not many options to generate the resources from the existing resources and was already facing the brunt of disasters since 2023 with loss of around Rs. 16000 crore caused by the monsoon mayhem. The decision of the Good and Service Tax (GST) Council to reduce the GST from 28 percent to 18 percent on cement has pushed the state in a financial dip.
He said that the State suffered a direct loss of around Rs. 1000 crore following the GST council meet and reduction on prices of cement and for the very reason the Government has enhanced the rate of cement to merely rupees five, which will also not going to compensate the loss the State, has suffered due to rationalization.
Himachal being a small hilly state with low population base has very low potential of increase in consumption despite better enforcement and timely compliance of returns, etc. In addition to lower growth in GST revenue, the discontinuation of GST Compensation is also putting substantial pressure on the state treasury. It is worth mentioning that in absence of GST compensation the state is facing a revenue deficit of approx. 17000 crores up to July 2025.
He countered the statement of opposition, that if they could understand the financial matrix in a better way, they could have not raised hue and cry over the increase of rupees five on a bag of cement. They should understand that the State has suffered a loss of more than Rs. 1000 crore due to GST rationalization. Alone due to reduction in GST on cement, the revenue will decrease by 150 to Rs 200 crore, thus putting added pressure on the State exchequer.
