Key Takeaways:

• The GST rate for finished steel will remain unchanged at 18% under the new structure.
• Construction and infrastructure to benefit most as GST on cement is reduced from 28% to 18% which could cut project costs by 3–5%.
• Auto sector sees significant relief as GST lowered to 18% on most vehicles, which is likely to drive automotive steel demand.
• Consumer durables become more affordable as products like refrigerators and ACs are now taxed at 18% instead of 28% boosting demand for coated and cold-rolled steel.
• Minor boost from steel utensils as GST cut from 12% to 5% on kitchen items, but impact on overall steel demand is expected to be small
• Lower costs in downstream sectors may drive consumption investment and import substitution.

India's long-desired Goods and Services Tax (GST) reform has finally emerged, featuring an extensive rationalization of tax rates for a broad spectrum of goods and services. Although finished steel products have not directly witnessed a change in their GST rate, the reform itself is expected to boost steel demand in a major indirect way, especially because of cost decreases in steel-intensive sectors like construction, infrastructure, automobiles, and consumer durables.

The structural reforms, implemented just in time for the festival season, reform the GST structure by removing the 12% and 28% slabs. 98% of items will be consolidated into three slabs: 0%, 5%, and 18%. The aim here is to reduce input costs and compliance to drive consumption and production in key sectors, of which many are heavy consumers of steel. 

Why the Steel Sector Stands to Gain

While there has been no change in GST on finished steel (at 18%), some benefit for the steel industry is likely to come from downstream demand from reduced GST rates in the downstream sectors where steel is used, such as: 

• Construction and infrastructure account for 59% of steel consumption.  
• Automobiles (11% steel demand). 
• Consumer durables (5% steel).

​

​

Construction & Infrastructure: The Largest Steel Consumers

The biggest boost comes from a significant reduction in GST rate on cement from 28% to 18%, also including reductions on other construction materials like marble and granite. This is expected to result in a combined reduction of 3-5% in construction costs, making projects more viable for developers, as well as crossing parameters for government infrastructural projects. 

Although the full benefit depends on how much of the savings are passed on by developers and whether governments accelerate infrastructure rollouts, the potential for increased steel consumption in these sectors is strong. Additionally, affordable and mid-segment housing may see higher launches and faster completions as developers leverage cost savings. 

Automobile and Consumer Durables: Demand Drivers with Fresh Incentives

The automotive industry, a substantial consumer of premium steel, also experienced substantial relief:

• GST has similarly decreased from 28% + cess to 18% in respect of most of the two-wheelers, passenger vehicles, and commercial vehicles.
• High-end vehicles now attract a GST rate of 40% instead of up to 50% previously imposed.
• The only relevant increase in this segment is the increase in GST from 28% to 28% + cess for premium two-wheelers over 350cc.

The growth of demand for automotive-grade steel has been growing at a CAGR of 10.5% from FY19-FY25, which was the highest of the large demanding sectors. It is projected to decelerate to a CAGR of 7% by FY30, and the reduction in growth may help sustain the increase. 

In addition, consumer durables, which included air conditioners, refrigerators, televisions, etc., also experienced GST decreases from 28% to 18%. As the likely cost decreases are passed on to the consumer, we would expect the volumes across this sector to increase, thereby lifting the demand for cold-rolled and coated steels used for appliance manufacturing.

Other Sectors and Modest Impacts

A reduction in GST on kitchen utensils made of steel, aluminium, copper, and iron from 12% to 5% was also part of the reform. However, this is expected to have only a marginal impact on total steel demand, given the relatively low steel volume in this segment.

Economic and Trade Context

The reform arrives during an increasingly challenging global trade environment: U.S. tariffs on Indian exports presented risks to India's growth outlook. By making domestic production cheaper, the GST cuts could also:

• Encourage import substitution,
• Improved export competitiveness, and
• Triggers a higher investment cycle. 

In addition, GST reductions on a range of everyday consumables, from biscuits, chocolates, and soaps to toothpaste (from 18% to 5%), will reduce price gaps between branded and unbranded goods and also promote greater formalisation of the economy.

Conclusion: A Structural Win for Steel

While the steel sector has not received a direct tax break, it is well-positioned to gain from the broader economic momentum triggered by the GST reform. Reduced costs imposed on construction, infrastructure, autos, and consumer goods will stimulate demand and speed up projects, which means more steel.

As developers and manufacturers begin passing on benefits and consumers respond positively, the indirect benefits to the steel industry could be substantial, marking this GST reform not just as a tax overhaul, but as a demand-side catalyst for India’s core industries.