Dairy industry benefits as GST slashed to Nil or 5% on most products

In a historic step to strengthen India’s dairy sector, the 56th GST Council, in its meeting held on 3 September 2025, approved sweeping rationalizations of Goods and Services Tax (GST) rates on milk and milk products. This reform marks one of the most comprehensive overhauls in the sector, ensuring that most dairy products are now either exempt from tax or attract only a minimal 5% GST.

The revised GST structure will come into effect from 22 September 2025, covering a wide range of dairy items:

• Ultra-High Temperature (UHT) milk – GST reduced from 5% to Nil

• Paneer / Chhena (pre-packaged and labelled) – GST reduced from 5% to Nil

• Butter, ghee, and dairy spreads – GST reduced from 12% to 5%

• Cheese – GST reduced from 12% to 5%

• Condensed milk – GST reduced from 12% to 5%

• Beverages containing milk – GST reduced from 12% to 5%

• Ice cream – GST reduced from 18% to 5%

• Milk cans – GST reduced from 12% to 5%

This significant rationalization is expected to benefit over 8 crore rural farmer families, particularly small, marginal, and landless labourers dependent on dairy farming, while also extending advantages to millions of consumers. By reducing tax burdens, the reform will lower operational costs, curb adulteration, enhance affordability, and make Indian dairy products more competitive in both domestic and global markets.

India is the world’s largest milk producer, with an output of 239 million tonnes in 2023–24, contributing nearly 24% of global production. Dairy remains the single largest agricultural commodity in the country, accounting for 5.5% of the national economy. In 2023–24, the value of milk output stood at ₹12.21 lakh crore, while the overall dairy market reached ₹18.98 lakh crore in 2024.

The new GST reforms are expected to provide a major boost to productivity, competitiveness, and sustainable livelihoods, strengthening the dairy sector’s role in ensuring food security, rural income generation, and employment across India.