GST Reduction in Dairy Products to Stimulate Demand and Encourage Innovation

The reduction in GST rates for dairy products to 5% will make nutritious, value-added products more affordable and accessible, stimulating demand, encouraging innovation, and strengthening the formal dairy ecosystem. This will expand the market for high-quality, packaged dairy products, benefiting consumers and dairy farmers, and aligning with the country's nutritional vision of making protein and calcium-rich foods more affordable.

The Indian government has announced a significant reduction in Goods and Services Tax (GST) rates for the dairy sector, effective September 22, 2025. This move aims to stimulate demand, encourage innovation, and strengthen the formal dairy ecosystem. The new GST rates will make nutritious, value-added products more affordable and accessible, aligning with the country's nutritional vision of making protein and calcium-rich foods more affordable.

Under the revised structure, ultra-high temperature (UHT) milk and paneer will be exempt from GST, while other dairy products such as butter, ghee, cheese, and ice cream will attract a 5% tax. This reduction is expected to benefit both consumers and dairy farmers by lowering operational costs and curbing adulteration [1].

Mukesh Ambani, Chairman and Managing Director of Reliance Industries Limited and Reliance Retail, welcomed the GST rationalization, calling it a "progressive step to make products affordable, ease operations, lower inflation, and boost retail consumption" [2]. The rationalization is expected to impact every stakeholder in the retail value chain, including farmers, MSMEs, producers, suppliers, kiranas, and end-consumers, by reducing costs, keeping inflation in check, and improving efficiency.

The dairy sector is a significant contributor to India's economy, with an output of 239 million tonnes in 2023-24, accounting for about 24% of global milk production. The overall market size of the Indian dairy sector is estimated at Rs 18.98 lakh crore in 2024. The GST reforms are expected to give a major boost to the sector, further enhancing its productivity and competitiveness while ensuring sustainable livelihoods for farmers [1].

In parallel, international players like Danone U.S. are investing in the dairy sector, expanding their production capacities to meet rising consumer demand for nutrient-rich foods. Danone's investment in its Minster, Ohio yogurt facility, which includes a 48,000 square-foot expansion and a new production line, demonstrates the sector's growth potential and attractiveness to global investors [3].

The reduction in GST rates for dairy products is a strategic move that aligns with the government's broader economic objectives of making essential goods more affordable and boosting domestic consumption. This reform is expected to have a positive impact on the dairy sector, benefiting both consumers and farmers, and contributing to the overall socio-economic development of the country.

References:
[1] https://m.economictimes.com/industry/cons-products/food/gst-rate-cut-to-spur-demand-in-rs-19-lakh-cr-dairy-industry-government/articleshow/123700318.cms
[2] https://www.businesstoday.in/latest/corporate/story/progressive-step-in-making-products-services-more-affordable-mukesh-ambani-on-gst-20-reforms-492633-2025-09-04
[3] https://perishablenews.com/dairy/danone-invests-in-americas-heartland-with-yogurt-plant-expansion/