Tax hike by Himachal triggers cement smuggling from Haryana, Punjab

A substantial reduction in the Goods and Services Tax (GST) on cement by the Central Government from 28 per cent to 18 per cent has not benefited the people of Himachal Pradesh, as the state government has increased levy on it.

Close on the heels of the announcement of a two-slab GST system by Prime Minister Narendra Modi on September 2, which curtailed this central tax on cement, the state government was quick to increase the certain goods carried by road (CGCR) tax in its September 15 Cabinet meeting.

The CGCR was not subsumed in the GST when the latter was introduced as ‘’one nation, one tax’’ in July 2017. The CGCR tax on cement has been hiked by around Rs 5 per bag, diluting the relief provided by the Modi government, which had reduced the cement price by around Rs 30 per bag. With construction activities picking up after rain, the sale of cement is all set to go up.

While the state government has termed the increase in the CGCR tax as a measure to overcome the reduction in taxes after the introduction of the two-slab GST system, the move has triggered smuggling of cement from Haryana and Punjab.

An official of the state Taxes and Excise Department said that cement bags were conveniently finding way into the state through border areas like Baddi, Nalagarh, Parwanoo, Kala Amb, Paonta Sahib and various places in Kangra, Bilaspur and Una districts as cement is cheaper in Haryana and Punjab. “Cement bags are usually concealed under other mining material like sand and cut stones. The concept of officials checking vehicles at the state borders was done away with after the introduction of the GST. Such vehicles enter Himachal unhindered from the state borders. Every bag bought from outside causes loss of taxes to the state exchequer,” the official rued.

The CGCR tax was earlier hiked in September 2023 from Rs 7.50 to Rs 11 per 50 kg bag. Additionally, the state levies Rs 120 per tonne on clinker and Rs 220 per tonne on cement for transport up to 250 km, with the rate doubling beyond that distance. Even limestone, a key raw material, faces this levy. In addition to this freight charges also remain abnormally high, at Rs 10.50 per tonne per km, in the state pushing up cement costs. Successive governments have failed to rationalise these rates making cement costlier in Himachal despite it being manufactured in the hill state.

Benefit denied

• The Central Government has reduced the GST on cement from 28 per cent to 18 per cent but it has failed to benefit the people of the state as the Congress government has increased levy on it