Karachi, July 1, 2024 – In a significant move impacting the construction and real estate sectors, the federal government has doubled the federal excise duty (FED) on the sale of cement through the Finance Act, 2024.
This change, effective from today, is set to influence the cost of construction materials across the country.
When the budget for 2024-25 was presented, the government proposed an increase in the rate of FED on various types of cement through the Finance Bill 2024. This proposal included Portland cement, aluminous cement, slag cement, super sulphate cement, and similar hydraulic cements, whether colored or in the form of clinkers. Initially, the rate was proposed to increase from Rs 2 per kg to Rs 3 per kg.
However, the Finance Act, 2024, has gone a step further, raising the rate of FED to Rs 4 per kg on cement sales. This represents a significant rise and is expected to have far-reaching consequences on the construction industry and related sectors.
The government justifies this increase as a necessary measure to boost revenue and manage the country’s fiscal deficit. Cement, being a key component in construction, presents a lucrative avenue for generating additional funds. However, this decision is also likely to lead to higher costs for construction projects, potentially impacting housing affordability and infrastructure development.
Industry experts have expressed concerns about the potential negative impact on the construction sector. With the increased cost of cement, builders and developers may face higher expenses, which could translate into increased prices for consumers. This could slow down ongoing projects and deter new investments in the real estate market.
On the other hand, some economists argue that the increased FED on cement could encourage more efficient use of materials and promote the adoption of alternative building techniques and materials, ultimately benefiting the environment and reducing waste.
As the new FED rates take effect, stakeholders in the construction and real estate industries will closely monitor the implications. The government’s ability to balance revenue generation with sustainable growth in these sectors will be crucial in determining the overall impact of this fiscal policy change.