Industry welcomes GST cut on diary, packaged foods, agri inputs

The union government in the 56th GST Council meeting on 3 September 2025 made significant rate cuts on several dairy and packaged food items, effective 22 September 2025, to benefit both farmers and consumers by spurring demand and making essential goods more affordable, finance minister Nirmala Sitharaman announced.

The rate on ultra-high temperature (UHT) milk as well as paneer and chhena (pre-packaged and labelled) has been reduced from 5% to nil. Butter, ghee, dairy spreads, cheese, condensed milk and milk-based beverages, and milk cans will attract 5% tax with effect from 22 September 2025, as compared to the 12%. The rate on ice cream has been cut from 18% to 5%.

The rate has been reduced on a variety of packaged and processed food items, mostly to 5%. GST on packaged namkeens, bhujia, mixtures, sauces, pasta, instant noodles, chocolates, coffee, cornflakes, and preserved meat has been reduced to 5%. Roti, chapati, and paratha will attract zero tax. The reduced prices for daily essentials and packaged foods provide direct savings for households.

Most notably, GST on restaurant meals is a flat 5% effective 22 September, down from the earlier range of 12% to 18%, depending on the restaurant category.

The tax on most agricultural inputs — from tractors to sprinklers, tyres, tubes, and hydraulic pumps, — has been cut to 5% from as high as 18% earlier.

Industry welcomes GST cut

Experts say that with the rate for many packaged items reduced to 5%, the tax difference between branded and unbranded foods is shrinking, which encourages consumers to shift towards branded, higher-quality products.

The ministry of fisheries, animal husbandry & dairying stated the lower taxes will benefit over 8 crore rural farmer families by boosting demand and helping to increase incomes. By making more products exempt or subject to a lower 5% tax, the rationalization is expected to increase demand and enhance the competitiveness of India’s dairy industry.

Reacting to the measures, Jayen Mehta, managing director of Gujarat Co-operative Milk Marketing Federation, Amul, told news agency ANI, “On behalf of the 36 lakh farmer families affiliated with the Amul Dairy Cooperative Movement in Gujarat and more than 10 crore families associated with the dairy industry of the country, we are thankful to PM Modi and FM Nirmala Sitharaman for this landmark decision of reduction in rates of most food items and particularly the dairy product categories. More than 30 different dairy and food product categories that we are associated with have seen a significant decline in the rates,” Mehta said.

Mayank Shah, vice president at Parle Products, said the move will not just boost consumption for the upcoming festival season but for the next 1-2 years. “Smaller packs priced at Rs 2,5,10,20, etc., will see grammage addition, while in bigger packs there will be price cuts which will aid consumption,” he added.

Rishabh Jain, CFO, Bikaji Foods International, said, “ We generally maintain a limited finished goods inventory of 2–4 days. We are closely reviewing the overall impact of these reforms on input and output taxes, and will take a considered decision on price reductions for our family pack namkeens by the end of this month.”

The decision to reduce the rates to a range of dairy products would have far-reaching benefits for consumers, farmers, a top official of Milky Mist said. The move would make nutritious, value-added dairy products such as cheese, butter, ghee, paneer more “affordable” and “accessible,” K Rathnam, CEO of the Tamil Nadu-based dairy products maker, has said.

“For the dairy sector, it is a timely boost that will stimulate demand, encourage innovation and strengthen the formal, organized dairy ecosystem. At Milky Mist, we see this as more than a tax reform, a catalyst for inclusive growth,” he said.

Mother Dairy said it will pass on the GSt cut benefits of the reduction on a wide range of products to consumers. Reacting to the decision, Manish Bandlish, managing director of Mother Dairy, said, ” We commend the Union Government’s decision to reduce rates on a wider range of dairy products, including paneer, cheese, ghee, butter, UHT milk, milk-based beverages, and ice creams.”

Simranjeet Singh, Director, CYK Hospitalities, said the rationalization represents a significant improvement for any startup or emerging brand in the F&B industry, as it promises a more manageable work life.

“Up until now, the multiplicity of GST tax slabs has posed serious troubles for the young entrepreneurs to construct a transparent price structure, to remain in compliance, and to contend with such customers who are cost-conscious. Two slabs, with 5% allocated for essentials and 18% for everything else, enhance the clarity of choice when operating a new venture and deciding on a product mix and expansion strategy. Greater transparency reduces compliance costs and gives confidence to investors in scalable F&B models.”

“The product on a lower slab is beneficial for startups, as cheaper products create demand for QSR concepts, cloud kitchens, and packaged foods, whereas premium concepts purchase on the higher slab. Thus, by way of creativity, the reform empowers the ecosystem through ingenuity, credibility, and promising avenues of growth for entrenched players as well as burgeoning entrepreneurs,” Singh said.