Mumbai, Sept. 4 -- The Goods and Services Tax (GST) Council has slashed the rate on cement from 28% to 18%, a move aimed at boosting construction activity.

"...because cement is so essential for the middle class when building homes, that is why the 28% has been reduced to 18%," said finance minister Nirmala Sitharaman, while addressing the media after the GST Council meeting on Wednesday night. The change will be effective from 22 September.

The decision, a long-pending demand of the industry and consumer groups, is expected to reduce the effective billing price of cement by nearly Rs.30 per bag, according to a 24 August Yes Securities note.

As demand is largely inelastic, a GST reduction may not immediately trigger a surge in consumpt...