The Himachal Pradesh government has defended its decision to increase cement prices by ₹5 per bag, stating that the move is essential to partially offset substantial revenue losses following the Goods and Services Tax (GST) Council’s recent tax cuts on cement.
Technical Education and Town and Country Planning (TCP) Minister Rajesh Dharmani explained that the reduction of GST on cement from 28% to 18% has resulted in nearly ₹1,000 crore in direct revenue losses for the state, exacerbating the financial strain on an economy already reeling from natural disasters. “While the GST cut benefits larger states with higher consumption, smaller hill states such as Himachal Pradesh, Jammu & Kashmir, Uttarakhand, and those in the Northeast bear the brunt,” he noted.
Revenue Decline Since GST Implementation
Under the previous VAT system, Himachal Pradesh’s revenue growth hovered around 16%. However, since the implementation of GST in 2017, growth has slowed to 7–8%. Although the GST Council had promised compensation to ensure states reach a 16% growth rate, the cess that provided this support was withdrawn in June 2022, leaving Himachal with limited financial resources.
Minister Dharmani highlighted that the state has already faced losses of around ₹16,000 crore due to the 2023 monsoon calamities. Additionally, Himachal is experiencing a revenue deficit of ₹17,000 crore as of July 2025. “The reduction of GST on cement alone is expected to cost the state ₹150–200 crore annually. Opposition parties should consider these financial realities before criticising a modest ₹5 increase in cement prices,” he said.
Impact of GST Rationalisation on Small States
Dharmani further explained that decisions taken during the 56th GST Council meeting have disproportionately affected smaller states. The council rationalised tax slabs by eliminating the 12% and 28% categories, introducing a 40% levy on sin goods, reducing most items from the 12% slab to 5%, and exempting insurance services. This restructuring is projected to cause an additional revenue shortfall of ₹300 crore for Himachal Pradesh.
“The GST rationalisation has put small states in a financial crunch. Despite strict compliance, our consumption potential is limited, and in the absence of adequate compensation, our treasury is under extreme pressure,” the minister added.
The government maintains that the ₹5 per bag cement price hike is a necessary measure to help stabilise state finances amid ongoing economic challenges and revenue constraints.
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