The GST rate cut will lead to a significant rise in consumption of dairy products in India, say experts
| Photo Credit:
PTI/Manvender Vashist Lav
Ice creams and other milk products like paneer, ghee, butter, cheese and condensed milk are all expected to become cheaper by 5-10 per cent as the dairy industry looks to pass on the benefits of the latest reduction in Goods and Service Tax (GST) to the consumers ahead of the festive season.
With GST levied on Ultra-High Temperature (UHT) milk and paneer being reduced to zero, the dairy industry also felt that the government’s move will lead to higher consumption of dairy products in India and will disincentive adulteration and tax evaders.
“Any move that brings down the price will increase the demand. Once products are at a more affordable price, the demand will go up. There has been a reduction in GST across the board. It is a welcome development for us as we operate in multiple categories including diary, chocolates and other food products.” Jayen Mehta, managing director of Gujarat Milk Cooperative Marketing Federation (GCMMF) which sells milk and milk products under the brand Amul, told businessline on Thursday.
While GCMMF said any reduction in prices will be implemented on “pro-rata basis”, Sudhir Shah, President of Indian Ice-cream Manufacturers’ Association (IICMA) said the association members will pass on lowering in GST rates to consumers by cutting the prices of ice creams by 10 per cent. “We are still studying and working on the exact amount of price-cut. Prima facie the reduction in prices will be around 10 percent,” Shah said after GST on ice creams have been reduced to 5 per cent from the existing 18 per cent.
Meanwhile, Amul said that the reduction in GST will lead to a significant rise in consumption of dairy products in India and will simultaneously discourage adulterators. “In India the per capita consumption of most of the categories in the dairy segment is still low in the organised sector. For instance, Ghee is the second largest dairy product in the country after milk. Ghee had a 12 per cent GST and traders and unscrupulous players used to not pass it through the GST-net leading to tax evasion. Secondly, adulteration used to happen as oil attracted five percent GST. Now with reduced GST, more players will come in the organised sector, there will be less incentive for evasion and adulteration. There will be a spurt in consumption,” Mehta from GCMMF said.
With the government reducing GST on milk being to zero — at par with pouched milk — the move is expected to push branded and packaged milk into markets where fresh milk is unavailable. The reduction of GST on butter and cheese will also increase the penetration of these products. “Currently the penetration of butter and cheese is still low. Only one in 10 Indians consume butter and one in 20 consume cheese. Similarly, the per capita consumption of ice-creams in India is just 500 millilitre (ml) annually. In developed countries the per capita annual consumption of ice cream is 15-20 litres. So there is a huge opportunity for growth in all these categories,” Mehta added.
The move to cut GST and the subsequent rise in consumption is expected to boost sales of Amul products this year. “Last year our sales had grown by 11-12 per cent. This year we were expecting 15 per cent growth. But it is expected to be in higher double digits now,” Mehta remarked.
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Published on September 4, 2025
