GST rate cut to spur demand in Rs 19 lakh cr dairy industry: Govt

India is the world’s largest milk producer, with an output of 239 million tonnes in 2023–24, accounting for about 24 per cent of global milk production.

The government on Thursday said the decision to ensure that most dairy products are now either exempt from tax or attract only a 5 per cent rate will boost demand in the Rs 19 lakh crore industry.

In an official statement, the Ministry of Fisheries, Animal Husbandry & Dairying said the 56th GST Council, in its meeting held on Wednesday, approved sweeping tax rationalisations on milk and milk products.

"These reforms mark one of the most comprehensive overhauls of GST rates in the sector, ensuring that most dairy products are now either exempt from tax or attract only a 5 per cent rate," it added.

Under the revised structure, effective from September 22, 2025, the GST rate on ultra-high temperature (UHT) milk is reduced to nil from 5 per cent.

The GST on paneer / chhena (Pre-packaged and labelled) has been reduced from 5 per cent to nil.

Butter, ghee, dairy spreads, cheese, condensed milk, milk-based beverages will attract 5 per cent GST from 12 per cent.

The GST on ice cream will come down to 5 per cent from 18 per cent. Milk cans will attract 5 per cent GST against 12 per cent, the statement said.

"This significant tax rationalisation is expected to boost the dairy sector and extend benefits to both farmers and consumers, contributing to the overall socio-economic development in the country," the ministry said.

The reform will directly benefit over 8 crore rural farmer families, particularly small, marginal and landless labourers engaged in rearing milch animals for their livelihoods.

The ministry said that lower taxation will help reduce operational costs and curb adulteration.

India is the world’s largest milk producer, with an output of 239 million tonnes in 2023–24, accounting for about 24 per cent of global milk production.

The overall market size of the Indian dairy sector is estimated at Rs 18.98 lakh crore in 2024.

"These recent GST reforms will give a major boost in further enhancing productivity and competitiveness of the sector while ensuring sustainable livelihoods," the ministry said.