Technical Education and TCP Minister Rajesh Dharmani has defended the State Government’s recent decision to increase the price of cement by ₹5 per bag, citing severe financial stress caused by the rationalization of the Goods and Services Tax (GST). He said the move was essential to offset the adverse impact of GST policy changes that have disproportionately affected hill states like Himachal Pradesh.
According to the minister, the state has suffered a direct revenue loss of approximately ₹1000 crore following recent decisions of the GST Council, particularly the reduction in GST on cement from 28% to 18%. He stated that the ₹5 price hike will not fully compensate the loss but was necessary to partially ease the financial burden.
The minister pointed out that under the earlier VAT regime, Himachal’s revenue had been growing at around 16% annually. However, since the rollout of GST in June 2017, revenue growth has declined to just 7–8%. The situation worsened in June 2022 when the GST Compensation Cess—promised to continue until states reached the pre-GST growth rate—was discontinued.
He emphasized that the GST framework benefits large, consumption-heavy states, while small states like Himachal Pradesh, Jammu & Kashmir, Uttarakhand, and those in the Northeast have been adversely affected. Himachal, with its limited consumption base and mountainous geography, has fewer avenues for expanding tax revenue despite efficient tax compliance.
In addition to GST-related losses, Dharmani highlighted that the state has suffered damages worth over ₹16,000 crore due to back-to-back natural disasters since 2023. With limited internal resources, the government is under enormous financial pressure.
Responding to opposition criticism over the cement price hike, the minister dismissed it as a lack of understanding of the state’s financial realities. He said that even the reduction of GST on cement alone is expected to cause a revenue shortfall of ₹150 to ₹200 crore.
Dharmani said he had raised Himachal’s concerns during the GST Council meetings but despite verbal assurances, the compensation cess was stopped. This has left the state to deal with the financial burden alone.
He also criticized the GST Council’s recent rate rationalization during its 56th meeting, which abolished the 12% and 28% tax slabs and introduced a 40% tax for “sin goods.” As per the new structure, over 90% of goods previously taxed at 12% will now fall under the 5% category. Rate reductions were also made for some items in the 18% slab, and insurance services were exempted from GST altogether. These changes are estimated to result in an additional revenue loss of ₹300 crore for the state.
In total, Himachal’s GST revenue, which previously stood at around ₹5300 crore, has now declined by nearly ₹1000 crore. Dharmani concluded that in such a constrained financial environment, modest price adjustments like the ₹5 cement hike are necessary steps to help the state navigate its current revenue crisis.
