23 September 2025
What the New GST Structure Looks Like
On September 3, 2025, the 56th GST Council meeting approved a sweeping overhaul of India's tax regime. The old four‑slab system – 5%, 12%, 18% and 28% – has been trimmed to three tiers: a 5% "merit" rate, an 18% standard rate and a punitive 40% rate for sin‑goods. This simplification is billed as the biggest post‑2017 tax reform, aiming to cut bureaucracy and stimulate demand for everyday essentials.
Under the revamped schedule, a swath of dairy products have been shifted to the GST 2.0 nil or 5% brackets. Items that once attracted 12%–18% tax, such as butter, ghee, cheese and many spreads, now fall under the merit rate. The move not only reduces the price tag for consumers but also brings Indian dairy taxation into line with global norms that often exempt basic nutrition.
- Zero‑rate items: fresh milk, pasteurised milk, UHT milk, chapati, paranthas, pizza bread, khakra.
- 5% merit‑rate items: butter, ghee, paneer, cheese, dairy spreads, condensed milk, yogurt, kefir, curd (pre‑packaged), lassi, buttermilk, cream, skimmed milk powder, baby milk food (excluding condensed milk).
- 18% standard‑rate items: premium, imported or specialty dairy products not listed above.
Beyond dairy, the Council also zero‑rated 33 lifesaving medicines, health and life‑insurance premiums, and essential educational materials. Daily staples and agricultural goods now sit at the 5% level, while electronics, small cars and motorcycles (≤350 cc) are taxed at 18%. Conversely, pan masala, certain sugary drinks and aerated waters have been bumped up to 40%.
What It Means for Consumers and Brands
For the average Indian household, the price impact can be noticeable. A litre of UHT milk that previously cost ₹70 after tax may now be priced around ₹65, while a 200‑gram pack of butter could see a drop of ₹5–₹10. These savings add up, especially for families that rely heavily on dairy as a protein source.
Leading dairy players like Amul and Mother Dairy have signalled that they will reflect the tax relief in their retail pricing. Analysts predict a modest 3%‑5% reduction across most product lines, a move that could sharpen competition among smaller regional brands seeking market share.
Retail chains are also preparing shelf‑side promotions. Large formats such as Big Bazaar and Reliance Fresh plan to highlight the “GST 2.0 price cut” label, hoping to draw price‑sensitive shoppers. Smaller kirana stores, which form the backbone of India's grocery network, are expected to benefit from lower tax compliance costs, translating into fewer paperwork headaches.
Economists argue that the lower GST on dairy could boost overall consumption, nudging protein intake upward in low‑income groups. Increased demand may, in turn, spur greater milk procurement from cooperative farms, potentially raising farmer earnings if supply chains remain efficient.
However, the shift also places pressure on the government’s revenue model. While the higher 40% rate on sin‑goods aims to offset losses from the dairy reprieve, critics warn that the punitive levy could push consumers toward unregulated markets for those items.
In the broader picture, the GST 2.0 reform reflects a policy pivot toward targeted relief for essential commodities while maintaining a fiscal buffer through higher rates on luxury and harmful products. The coming months will reveal how quickly retailers adjust pricing and whether the intended boost in dairy consumption materialises across India.
Write a comment
Latest Posts
