India’s dairy industry has received a major boost with the 56th GST Council meeting approving tax rationalization on milk and milk-based products. Effective from September 22, 2025, most dairy items will either fall under the nil GST category or attract a reduced 5% rate. This move is expected to benefit farmers, consumers, and the overall dairy ecosystem while enhancing the global competitiveness of Indian dairy products.
The GST Council, in its 56th meeting, finalized a comprehensive restructuring of GST rates for milk and dairy products. This rationalization aims to make dairy more affordable for consumers and profitable for producers.
Nil GST (0%): Ultra-High Temperature (UHT) milk, pre-packaged paneer, and chhena.
Reduced 5% GST: Butter, ghee, cheese, dairy spreads, condensed milk, milk-based beverages, ice cream, and milk cans.
Earlier, many of these products attracted GST rates ranging between 5% and 18%, making them costlier for consumers and less competitive for producers.
The dairy sector in India is largely dependent on small and marginal farmers, with over 80% of dairy producers owning fewer than five cattle. By bringing most dairy products under 0% or 5% GST, the government is directly supporting these families.
Higher Profit Margins: Reduced tax burden means more income for farmers.
Encouragement for Milk Production: Lower costs encourage greater participation in the sector.
Boost to Rural Economy: More than 70 million households in India rely on dairy as a primary or supplementary income source.
This move is expected to strengthen rural livelihoods and reduce financial stress on small-scale farmers.
Consumers will also benefit from lower prices of essential dairy products. Items like milk, paneer, butter, and ghee, which are a part of everyday diets, will now be more affordable.
Cheaper Milk-Based Beverages & Ice Creams: Reduction in GST makes processed dairy more accessible.
Support to Middle-Class Households: Families spending significantly on dairy will feel direct savings.
Nutritional Security: Affordable dairy ensures that more people can access protein and calcium-rich products.
India is the world’s largest milk producer, with an output of 239 million tonnes in 2023–24, accounting for nearly one-fourth of global production. However, higher domestic taxes have often made Indian dairy products less competitive internationally.
The GST reduction will:
Lower Production Costs: Producers can offer milk-based products at better prices.
Boost Exports: Cheese, ghee, and milk powder may gain traction in foreign markets.
Strengthen Dairy Cooperatives: Organizations like Amul and Nandini will have better margins to expand globally.
The Indian dairy industry is not just about food—it’s an economic powerhouse.
Contribution to GDP: Around 5.5% of the national economy comes from dairy.
Value of Milk Output: ₹12.21 lakh crore in 2023–24.
Market Size: Estimated at ₹18.98 lakh crore in 2024, with rapid growth expected in value-added dairy products.
By easing GST rates, the government has further strengthened one of India’s most vital agribusiness sectors.
The tax rationalization is more than just a fiscal measure—it represents a strategic step to empower farmers, reduce consumer costs, and enhance India’s standing in the global dairy industry. With demand for milk and milk-based products expected to rise both domestically and globally, the move will accelerate growth in the coming years.
Conclusion
The GST rationalization on dairy products is a win-win for all stakeholders. Farmers will enjoy higher margins, consumers will get affordable dairy essentials, and the industry will become more competitive globally. As India continues to dominate global milk production, such reforms will ensure sustainable growth, rural development, and nutritional security for millions.