What is the GST on milk?
The Goods and Services Tax (GST) rules on milk have been made clearer after recent changes. Fresh milk—whether raw or pasteurised—is completely exempt from GST (0%). This exempted GST rate now also includes all unflavoured packaged milk, like UHT (Ultra-High Temperature) milk. So, it is not correct to say that “some types of packaged milk” are taxed—all basic unflavoured packaged milk is GST-free.
However, processed milk products like condensed milk and flavoured milk still have GST, usually at 5%. This tax rate helps the government earn revenue while still keeping essential items affordable.
Knowing these differences is important for correct pricing and GST compliance in the dairy business.
GST rates on milk, paneer, curd, and dairy products
Milk and dairy products are essential everyday items in India. The latest GST reforms (called GST 2.0) have made the tax system easier by reducing GST rates on many value-added dairy products. Earlier, some of these items were taxed at 12% or 18%, but now they fall under the 5% or even 0% (exempt) category. This change is meant to encourage more consumption and give some financial relief to families.
Here’s a simple breakdown of the changes:
Product Category
|
Previous GST Rate
|
New GST Rate (from 22 Sept 2025)
|
Impact
|
Fresh Milk (Loose/Pasteurised)
|
0% (Exempt)
|
0% (Exempt)
|
No change
|
UHT Milk (Pre-packaged and Labelled)
|
5%
|
0% (Exempt)
|
Major price drop
|
Chena/Paneer (Pre-packaged and Labelled)
|
5%
|
0% (Exempt)
|
Major price drop
|
Curd/Lassi/Buttermilk (Packaged)
|
5%
|
5%
|
No change
|
Butter/Ghee/Dairy Spreads
|
12%
|
5%
|
Cheaper (Lower tax)
|
Condensed Milk
|
12%
|
5%
|
Cheaper (Lower tax)
|
Cheese (All types)
|
12%
|
5%
|
Cheaper (Lower tax)
|
Ice Cream
|
18%
|
5%
|
Big drop in price
|
Khoya/Mawa
|
5%
|
5%
|
No change
|
Flavoured Milk
|
12%
|
5%
|
Cheaper (Lower tax)
|
These new rates are expected to benefit both consumers and the dairy industry by making dairy products more affordable and boosting overall demand.
List of milk and dairy products with a 0% of GST rate
Here’s a table listing milk and dairy products with a 0% GST rate, following your requested format:
GST Rates on Common Dairy Products (Effective from 22 September 2025)
Product Category
|
Previous GST Rate
|
New GST Rate (from 22 Sept 2025)
|
Fresh Milk (Unpackaged/Loose)
|
0%
|
0%
|
Pasteurised Milk (Packed, Unsweetened, Not Concentrated)
|
0%
|
0%
|
UHT Milk (Tetra Pack/Long-Life Milk)
|
5%
|
0%
|
Chena or Paneer (Pre-packaged and Labelled)
|
5%
|
0%
|
Curd, Lassi, Buttermilk (Loose and Not Labelled)
|
0%
|
0%
|
Fortified Toned Milk (with added vitamins like A and D)
|
0%
|
0%
|
List of milk and dairy products with a 5% of GST rate
Here’s a table listing milk and dairy products that are subject to a 5% GST rate:
Milk and Dairy Products – GST Rate Changes (Effective from 22 September 2025)
Product
|
Previous GST Rate
|
New GST Rate
|
Butter
|
12%
|
5%
|
Ghee (including butter oil and other milk fats)
|
12%
|
5%
|
Cheese
|
12%
|
5%
|
Condensed Milk (Sweetened or Unsweetened)
|
12%
|
5%
|
Dairy Spreads
|
12%
|
5%
|
Skimmed Milk Powder
|
5%
|
5%
|
Flavoured Milk
|
5% or 12%
|
5%
|
Milk-based Beverages (except UHT milk)
|
12%
|
5%
|
Yogurt/Kefir (Pre-packaged and labelled)
|
5%
|
5%
|
Pre-packaged and labelled Curd/Lassi/Buttermilk
|
5%
|
5%
|
Ice Cream and Edible Ice (Frozen desserts)
|
18%
|
5%
|
Cocoa Powder, Cocoa Butter, Fat and Oil
|
18%
|
5%
|
Chocolates and Other Food Preparations with Cocoa
|
18%
|
5%
|
Pastry, Cakes, and Other Baker’s Wares
|
18%
|
5%
|
These products attract an 18% GST under the Indian Goods and Services Tax regime.
Exemptions from GST on milk
The GST system gives important tax exemptions on basic dairy products to keep them affordable for everyone. Fresh milk (including pasteurised milk, but not UHT milk) and raw milk are fully exempt from GST (0%), no matter where they come from. This helps support farmers and ensures that basic nutrition stays within reach for all.
Some processed dairy items have seen recent changes in GST rules. Unpackaged and unlabelled curd (dahi) and buttermilk are still tax-free (0% GST). A key update from 22 September 2025 is that UHT milk and pre-packaged, labelled chena or paneer are now also exempt from GST, which means lower prices for consumers.
Other processed dairy products like butter, ghee, and cheese now have a reduced GST rate of 5%, down from the earlier higher rates. These changes by the GST Council aim to balance the need for government revenue with the goal of keeping essential food items affordable for the public.
How to calculate GST on milk?
Although pre-packaged paneer is now GST-exempt, the following method is still used to calculate GST for other taxable pre-packaged dairy products like ghee, butter, or cheese, which now usually fall under the 5% GST rate (as per the latest updates).
Formula:
GST Amount = Selling Price (before tax) × GST Rate
Example (for a taxable product like Ghee with 5% GST):
If a packet of ghee is priced at Rs. 100 before tax:
So, the final price including GST would be Rs. 105.
Using a GST calculator can make this process easier and help avoid mistakes. Businesses are advised to use such tools to stay GST-compliant and manage their pricing more effectively.
GST impact on dairy industry
Under the GST system, there is a clear difference between raw/fresh milk and processed or packaged dairy products. The latest GST updates have changed rates to make several items more affordable, especially for consumers and farmers.
Category
|
GST Rate (After Recent Changes)
|
Key Updates
|
Fresh Milk / Raw Milk
|
Exempt (0%)
|
Still fully tax-free, helping reduce financial pressure on farmers.
|
UHT Milk (Pre-packaged)
|
Exempt (0%)
|
GST removed (earlier 5%), making it cheaper for buyers.
|
Pre-packaged & Labelled Paneer / Chena
|
Exempt (0%)
|
GST removed (earlier 5%), offering price relief to consumers.
|
Loose / Unpackaged Paneer, Curd, Buttermilk
|
Exempt (0%)
|
Continues to be GST-free.
|
Butter, Ghee, Cheese, Dairy Spreads, Condensed Milk
|
5%
|
GST reduced from 12%-18% to 5%, lowering market prices.
|
Khoya (Mawa)
|
5%
|
Now taxed at a 5% GST rate.
|
Dairy Machinery & Milking Machines
|
18%
|
Standard GST for capital equipment used in the dairy industry.
|
Milk Cans (Iron, Steel, or Aluminium)
|
5%
|
GST cut from 12% to 5%.
|
These changes aim to balance affordability for consumers and support for dairy businesses, while still generating revenue for the government.
Effect of GST on Dairy Farmers and Consumers
Dairy Farmers: The GST exemption on raw milk provides important relief. However, taxes on items like dairy machinery (18%) and earlier GST on processed products such as UHT milk and paneer (5%) increased their costs. With recent GST cuts or exemptions on key products like UHT milk, pre-packaged paneer, and inputs like milk cans, farmers are expected to benefit from higher demand and better income.
Consumers: When a 5% GST was first applied to products like pre-packaged paneer and UHT milk, prices went up for buyers. But recent reductions—making UHT milk and pre-packaged paneer exempt and lowering GST on butter, ghee, and cheese to 5%—have helped reduce retail prices. This has made dairy products more affordable, easing the financial burden on families.
Challenges in GST implementation for the dairy industry
Compliance Burden: Small dairy producers often find it hard to follow the GST rules, as filing taxes and claiming Input Tax Credits (ITC) can be complicated for them.
Tax Evasion: Some of the recent changes were made to stop loss of revenue caused by unregistered sellers who avoid GST. This unfairly affects registered businesses that pay their taxes properly.
Input tax credit claims for milk
Businesses involved in the production and distribution of milk can benefit from input tax credit (ITC) claims. The input tax credit allows businesses to offset the GST paid on inputs against the GST collected on sales. For example, if a dairy company purchases machinery or packaging materials and pays GST on these inputs, it can claim this as a credit against the GST collected on the sale of milk products. This mechanism reduces the overall tax burden on businesses, promoting efficiency and cost-effectiveness. Proper documentation and compliance with GST regulations are essential to maximising input tax credit claims, benefiting the business's financial health.
Example of ITC Claim
Imagine you're running a dairy business, purchasing milk, curd, and paneer for resale. The total GST you pay on these purchases amounts to INR 10,000. When you sell these products, you collect GST of INR 15,000. By claiming an Input Tax Credit (ITC) of INR 10,000, your net GST payable is reduced to INR 5,000.
Eligibility Criteria for Claiming ITC (Section 16(1) of the CGST Act)
To claim Input Tax Credit (ITC) on dairy products under GST, the following conditions must be fulfilled:
- GST Registration: The claimant must be a registered taxpayer under GST.
- Business Usage: The dairy products should be used strictly for business activities.
- Valid Documentation: A proper tax invoice or debit note from the supplier must be available.
- Goods Received: The products must be physically received by the business.
- Tax Paid by Supplier: GST on the transaction must be paid by the supplier to the government.
- Return Submission: Relevant GST returns must be filed to process the ITC claim.
These rules ensure ITC is availed only for legitimate business transactions.
Process of Claiming ITC on Dairy Products
Here’s how to claim and utilise Input Tax Credit (ITC) on dairy products effectively under GST:
- Ensure GST registration: Your business must be registered under GST to become eligible for claiming ITC
- Maintain proper documentation: Retain all relevant tax invoices, debit notes, and receipts related to dairy product purchases. These records are essential for ITC claims.
- Verify invoices with GSTR-2A: Match your purchase invoices with the supplier’s GSTR-1 details to ensure consistency with your GSTR-2A.
- File GST returns: Submit timely and accurate GSTR-3B (summary) and GSTR-1 (outward supplies) returns to avoid discrepancies.
- Claim ITC in GST return: Report eligible ITC in the correct section of your GSTR-3B return to avail the credit.
- Utilise ITC: Use the claimed ITC to offset your output GST liability, helping reduce your overall tax burden.
When ITC Cannot Be Claimed (Section 17 of the CGST Act)
ITC is not applicable in the following cases:
- Personal consumption: Dairy products used for personal use are not eligible for Input Tax Credit.
- Exempt supplies: No ITC can be claimed on goods like fresh milk, which are classified as exempt or non-taxable under GST.
Amendments of GST regulations for dairy products
In the ever-evolving dairy industry, ensuring affordable access to essential products such as milk, curd, and paneer is vital for both consumers and businesses. While these dairy staples were historically exempt from GST to maintain low prices, recent amendments reflect the government's response to revenue concerns and changing market conditions.
The 47th GST Council meeting introduced significant measures aimed at addressing revenue leakage caused by unregistered entities selling dairy products without complying with GST requirements. This has raised concerns about fairness, particularly for registered businesses that are adhering to the regulations.
Key changes include:
Fortified toned milk
As per CBIC Circular No. 52/26/2018-GST, dated August 9, 2018, fortified toned milk remains exempt from GST when enriched with essential vitamins such as A and D. This exemption highlights the government's focus on promoting health and nutrition while ensuring the affordability of fortified milk under HSN code 0401.
Khoya/ mawa
On the other hand, khoya (mawa), classified as a concentrated milk product under HSN code 0402, now attracts a 5% GST, as per F. No. 332/2/2017-TRU, dated December 7, 2017. This change reflects a policy shift aimed at balancing revenue generation with keeping essential dairy products accessible to consumers.
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Conclusion
The recent GST changes show a clear focus on making important dairy products more affordable. By moving pre-packaged items like curd, paneer, and UHT milk back to the 0% GST rate and lowering taxes on products like ghee and cheese to 5%, the government aims to encourage more consumption, help registered businesses, and ensure everyone has access to nutritious food, while balancing tax revenue with public welfare.
