Representative Photo
By Andalib Akhter
The Union government’s recent GST cuts are being hailed as a historic move, particularly for the dairy sector. Exempting milk and cheese from GST, along with reducing the rate on butter and ghee from 12% to 5%, appears to offer direct relief to both farmers and consumers. But the larger question is: will this really translate into cheaper milk and dairy products for the common man?
Economists believe that lower GST will ease costs for dairy cooperatives and farmers. Cheaper packaging and logistics could boost competitiveness, enabling small farmers and self-help groups (SHGs) engaged in milk processing to deliver products at more affordable rates. This, in turn, may strengthen rural economies and household nutrition, given milk’s role as a vital source of protein and calcium.
However, experts caution that dairy pricing is not determined by taxation alone. Rising input costs such as cattle feed, electricity, fuel, and labor continue to drive prices upward. Without easing these, the impact of tax relief may remain limited.
Despite this, major cooperatives like Amul have welcomed the reforms, calling them a game-changer that could enhance farmer incomes and consumer benefits. Women-led rural enterprises, in particular, stand to gain significantly.
The unanswered question remains: in the months ahead, will shoppers at local markets actually find milk and dairy products at lower prices, or will the impact of this decision stay confined to government policy papers?
What’s Inside the New GST Reforms?
The Union government has announced sweeping cuts in the Goods and Services Tax (GST), a move expected to directly benefit cooperatives, farmers, and rural industries, while bringing relief to over 100 million dairy farmers across India.
In the dairy sector, milk and cheese have been completely exempted from GST. The tax on butter and ghee has been reduced from 12% to 5%, and GST on milk cans made of iron, steel, or aluminum has also been lowered from 12% to 5%. These measures are designed to make dairy products more competitive, ease consumer costs, and strengthen women-led rural self-help groups engaged in milk processing.
Food processing has also received a boost, with taxes on cheese, snacks, pasta, jams, juices, chocolates, coffee, biscuits, and ice creams slashed from 18% or 12% to just 5%. This will lower household expenses, increase demand in semi-urban and rural areas, and expand opportunities for cooperatives and private dairies alike.
To support agriculture, GST on tractors and spare parts (tyres, hydraulic pumps, etc.) has been reduced from 18% to 5%. Fertilizer inputs such as ammonia and sulphuric acid have also been moved down from 18% to 5%, ensuring cheaper fertilizers for farmers in time for sowing.
Further, 12 biological pesticides and micronutrients now attract only 5% GST, a step that will encourage sustainable and organic farming while benefiting small farmers and Farmer Producer Organisations (FPOs).
In logistics, GST on commercial trucks and delivery vans has been cut from 28% to 18%, while third-party insurance premiums are now taxed at only 5%. This will reduce transportation costs for agricultural produce and enhance export competitiveness.
Overall, these reforms promise to strengthen cooperatives, reduce farming costs, boost rural industries, and energize the rural economy.