How GST reduction on dairy products will aid 10cr farmers
What's the story
The Indian government recently announced a reduction in Goods and Services Tax (GST) rates on dairy products, agricultural inputs, and food processing items. The move is expected to directly benefit over 10 crore farmers, including those in the dairy sector, in the country, the Ministry of Cooperation said on Saturday. The restructuring aims to address the inverted duty structure in fertilizer manufacturing and prevent price hikes for farmers.
Economic impact
Tractors and components
The GST cuts on milk and paneer, along with lower rates on processing equipment, are likely to boost margins for individual farmers and dairy cooperatives. Major dairy brands like Amul have welcomed the announcement. The reduction in tractor and component prices will especially benefit small farmers involved in mixed farming and animal husbandry, as these tractors are often used for fodder cultivation and transportation of farm produce.
Demand stimulation
Stimulating demand in semi-urban and rural areas
The GST cuts are aimed at stimulating demand in semi-urban and rural areas, reducing household expenditure on essential food items, and boosting the food processing sector. The government also hopes to improve export competitiveness and reduce freight rates across the supply chain by cutting logistics costs through reduced GST on commercial vehicles. These changes are part of a larger effort to promote sustainable farming practices in India.
Sector growth
Tax rationalizations on milk and milk products
The government has also announced tax rationalizations on milk and milk products. Under the new structure, effective from September 22, 2025, the GST rate on ultra-high temperature (UHT) milk has been reduced to nil from 5%. Paneer/chhena (pre-packaged and labeled) will now attract no tax instead of a 5% rate. Butter, ghee, dairy spreads, cheese, and condensed milk will now attract a lower GST of 5%, down from the previous rate of 12%.