NEW DELHI, 1 August 2025: In the run-up to the 56th GST Council meeting, India’s dairy industry has renewed its call for rationalizing the goods and services tax on ghee and butter, demanding that the current 12% GST rate be lowered to 5%.
While milk, curd, buttermilk, and lassi are taxed at 5% or are exempt, traditional dairy fats like ghee and butter attract a significantly higher tax, prompting industry leaders to raise concerns about consumer affordability, product adulteration, and the financial health of dairy farmers.
Key dairy players including Amul, Nova Dairy, Paras Dairy, and SMC Foods, along with the India Dairy Association (IDA), have made a joint appeal to the GST Council for rate parity with refined edible oils, which are currently taxed at just 5%.
“The 12% GST on ghee unfairly burdens both consumers and producers,” said Dr. R.S. Sodhi, President of the India Dairy Association. “It makes ghee costlier than refined oils, encouraging adulteration and impacting farmer incomes.”
The industry warns that the current disparity incentivizes informal and often unregulated markets, where adulteration is rampant and quality is compromised.
Rajender Singh, Managing Director of Paras Dairy, noted that “a 5% GST will make quality dairy fats more accessible to consumers and discourage entry of spurious products.”
Echoing similar concerns, Sandeep Aggarwal of SMC Foods said the higher tax compresses margins and stifles innovation. “A rationalized GST rate would allow investments in product development and distribution without burdening consumers.”
Ravin Saluja of Nova Dairy emphasized the cultural and nutritional significance of ghee. “Taxing ghee higher than refined oils defies both logic and tradition,” he said.
Tax policy experts have also weighed in. Pankaj Jain, Indirect Tax Partner at EY India, said GST reform has streamlined taxes, but further rationalization is needed. “A data-driven move to bring ghee and butter under the 5% slab could maintain revenue neutrality while improving affordability,” he said.
According to sources, the GST Council is exploring a possible overhaul of the 12% slab, with some items likely to be moved to either 5% or 18%, potentially impacting dairy fats.
The IDA and other stakeholders argue that such a move would benefit more than 80 million smallholder households engaged in dairy production. Ghee alone accounts for nearly 30% of India’s milk output.
A reduction in GST, they say, would strengthen formal markets, boost rural incomes, and make healthy, traditional products more affordable amid inflation concerns.A
