GST Council has given a major boost to India’s dairy sector with a sweeping overhaul of tax rates on milk and milk products. At its 56th meeting on September 03, 2025, the Council approved rationalization measures that will make most dairy items either tax-free or taxed at just 5%, effective from September 22.
Under the revised structure, Ultra High Temperature (UHT) milk and pre-packaged paneer or chhena will now be fully exempt from GST. Popular items such as butter, ghee, cheese, condensed milk, dairy-based beverages, ice cream, and milk cans will see their rates reduced sharply from 12–18% to just 5%.
According to the government, the move will directly benefit more than eight crore rural farmer families, especially small and marginal dairy farmers, while also easing the burden on consumers. Lower GST is expected to cut production costs, curb adulteration, improve efficiency, and make Indian dairy products more competitive in global markets.
India is already the world’s largest milk producer, with an output of 239 million tonnes in 2023–24, contributing nearly 24% of global milk production. The dairy sector is a cornerstone of the rural economy, contributing 5.5% to the national GDP. The value of milk output stood at Rs 12.21 lakh crore in 2023–24, while the overall dairy market was estimated at Rs 18.98 lakh crore in 2024.
Experts believe the GST Council’s reforms could be transformative for the sector. For farmers, the lower tax burden is likely to translate into better returns, while for consumers, it promises greater affordability of everyday essentials like ghee, paneer, and cheese.
