By Rahul Bhandari

Copyright thenewshimachal

Shimla – Backing the State Government’s decision to increase the price of cement by ₹5 per bag, Technical Education and Town & Country Planning Minister Rajesh Dharmani said the move was necessary to partially offset the severe financial blow Himachal Pradesh has suffered due to GST rationalisation. He said the state, already reeling from the brunt of natural disasters since 2023, has suffered a direct loss of around ₹1,000 crore following the recent GST Council decision to slash tax on cement from 28% to 18%.

Dharmani said that during the Value Added Tax (VAT) regime, Himachal’s revenue was growing at nearly 16%, but after GST was introduced in 2017, the growth fell to 7–8%. “This decision of the Union Government has benefited big states where consumption is more, but small hill states like Himachal, Jammu and Kashmir, Uttarakhand, and the North Eastern states are the worst sufferers,” he remarked.

He added that the GST Council had assured compensation to hill states until their revenue growth reached 16% again, but the cess was discontinued in June 2022, leaving Himachal with limited resources. “The state has been facing recurring disasters, with monsoon damages since 2023 alone estimated at ₹16,000 crore. In this backdrop, reducing GST on cement has deepened the financial crisis,” the Minister said.

Dharmani explained that despite the ₹5 per bag increase in cement prices, the state will not be able to fully recover the loss. “Himachal has a small population base and low consumption potential. Even with better compliance, GST revenue is declining. The withdrawal of GST compensation has created a revenue deficit of around ₹17,000 crore up to July 2025,” he pointed out.

Countering opposition criticism, the Minister said, “If they understood the financial matrix better, they would not raise a hue and cry over a nominal ₹5 increase. Alone due to the GST reduction on cement, Himachal will lose ₹150 to ₹200 crore annually. The opposition must realise that the state has already lost over ₹1,000 crore because of GST rationalisation.”

He added that Himachal had strongly raised its concerns in the GST Council meeting, but despite assurances, the compensation cess was withdrawn. He warned that while the tax cut may ease the burden on consumers in the short term, the state’s development works will inevitably be hampered due to revenue shortages.

The Minister also highlighted that in the 56th GST Council meeting, sweeping rate rationalisation was proposed. The 12% and 28% slabs were abolished, a 40% slab was introduced for “sin goods,” and many goods under the 12% slab were shifted to 5%. Rate cuts in the 18% slab, including on some foods, and exemption of insurance services from GST are expected to further reduce Himachal’s collections by nearly ₹300 crore.

“Himachal used to fetch around ₹5,300 crore before rationalisation, but the reduction has cut this down drastically,” Dharmani said, cautioning that development projects will face hurdles if the state continues to suffer massive revenue losses.