CASE STUDY ANALYSIS: GST REFORMS VIS-À-VIS PSI INCENTIVES CLAIM FOR CEMENT PLANT IN MAHARASHTRA STATE

CA Nitin Mantri | www.globalwisdombmc.in | www.canitinmantri.com

GST Reform Case Study (Macro Sectoral Impact)

Policy Shifts

• Cement GST reduced 28% → 18%.
• Coal GST increased 5% → 18%, cess ₹400/MT removed (ITC available).
• Transport GST rationalised (5% / 18% with ITC; rentals & vehicles cheaper).

Impacts

• Fuel Cost: ↓ ~₹2 per bag (coal ITC credit).
• Cement Retail Price: ↓ ~₹26–30 per bag.
• Logistics: Cheaper freight, 5–7% savings.
• Demand: Infra & housing boosted.
• Sector Outlook: Net positive → higher consumption, stronger competitiveness.
• Power sector faces cost escalation, coal-using manufacturing industries (cement, steel, etc.) benefit from lower net input cost due to ITC credit availability.

PSI Incentive Claim Case Study (Micro Financial Impact)

Framework

• Maharashtra PSI Incentives refund = 14% of Net SGST paid.
• Higher ITC lowers Net SGST liability, reducing cash incentive eligibility.

Numerical Illustration (₹1000 Cr Sales, ₹200 Cr Coal, ₹100 Cr Inputs)

Particulars	Old (28% Cement, 5% Coal, 18% other)	New (18% Cement, 18% Coal, 18% other)
Cement SGST Liability	₹140 Cr	₹90 Cr
ITC Credit (Coal + Others)	₹28 Cr	₹54 Cr
Net SGST Payable	₹112 Cr	₹36 Cr
PSI Incentive (Subject to annual cap)	₹112 Cr	₹36 Cr

Key Observation

• Direct PSI claim falls ~68% despite GST reforms being positive overall.
• Reason: Incentive % is tied to Net SGST payable, which shrinks under new tax design.

Vis-à-Vis Comparative Insights

Aspect	GST Reform Case Study (Macro)	PSI Incentive Case Study (Micro)
Fuel / Coal Cost	Reduced (ITC on 18% GST, cess removed)	Higher ITC inflow reduces Net SGST
Cement Output GST	28% → 18% (consumer price ↓ ₹26–30/bag)	Lower output tax liability reduces SGST payable (14% → 9% SGST)
Transport / Logistics	Rationalised GST, reduced costs 5–7%	Fleet purchase cheaper (28% → 18% GST)
Demand Impact	Infra, housing, consumer demand ↑	No direct effect, but higher sales can offset
Incentive Claim (PSI 14%)	Not relevant at macro level	Falls sharply (₹112 Cr → ₹36 Cr)
Net Outcome	Sector outlook: Positive, growth-driven	Company subsidy receipts: Reduced drastically

Strategic Advisory

Macro Benefit → Cement sector becomes more cost-efficient & consumer-friendly (prices fall, demand rises).
Micro Drawback → PSI incentive claims shrink, reducing cash inflows.
Way Forward:

• Cement plants must re-optimise financials, using higher demand & lower costs to offset lower PSI subsidies.
• Explore additional incentives:
  • Green Energy/WHRS subsidy.
  • Mega / Ultra-Mega project classification for higher claim period.
  • Infrastructure linked incentives.

Conclusion

• GST reforms create a macro win (lower prices, higher demand, stronger competitiveness).
• But PSI-linked industries see a micro challenge (smaller subsidy refunds).
• Cement companies must balance subsidy planning with market strategy to unlock the full benefits.

Disclaimer

The information, illustrations, and analyses contained in this case study are provided solely for general informational and educational purposes. While every effort has been made to ensure accuracy based on the GST Council announcements, Maharashtra PSI scheme provisions, and current market practices, the contents herein:

• Do not constitute professional advice on taxation, incentives, subsidies, or compliance.
• Are based on assumptions and illustrative examples (e.g., sales volume, input costs, ITC availability) and may not reflect the actual financial position of any specific business.
• May be subject to change without notice due to future amendments in GST laws, PSI policies, or government notifications.
• Should not be relied upon as the sole basis for making business, investment, or financial decisions.

Readers are strongly advised to consult their Chartered Accountant, Tax Consultant, or Incentive Specialist for guidance tailored to their particular circumstances before acting on any information contained in this document.

Neither Global Wisdom Business Management Consulting Pvt Ltd nor its representatives accept any liability for errors, omissions, or consequences arising from the use of this material.