GST Council unveils tax reforms for dairy sector and trade facilitation

INDIA – The GST Council, during its 56th meeting held on September 3, 2025, in New Delhi, has announced a series of major reforms, including rate rationalisation and trade facilitation measures aimed at streamlining taxation and boosting trade efficiency.

Under the newly approved two-rate GST structure—comprising a 5% merit rate and an 18% standard rate—the Council has significantly reduced the tax burden on essential dairy products.

Ultra-High Temperature (UHT) milk, along with pre-packaged and labelled paneer (chena), has been exempted from GST entirely, down from the previous 5% rate.

Other dairy-related items such as condensed milk, butter, cheese, and milk-based beverages have seen their GST rates slashed from 12% to 5%, aligning with the Council’s broader goal of correcting inverted duty structures and promoting equitable taxation.

This significant rationalization is expected to benefit over 8 crore rural farmer families, particularly small, marginal, and landless labourers dependent on dairy farming, while also extending advantages to millions of consumers.

By reducing tax burdens, the reform will lower operational costs, curb adulteration, enhance affordability, and make Indian dairy products more competitive in both domestic and global markets. India is the world’s largest milk producer, with an output of 239 million tonnes in 2023–24, contributing nearly 24% of global production.

Dairy remains the single largest agricultural commodity in the country, accounting for 5.5% of the national economy. In 2023–24, the value of milk output stood at ₹12.21 lakh crore, while the overall dairy market reached ₹18.98 lakh crore in 2024.

Beyond dairy, the Council introduced a suite of trade facilitation measures set to take effect from November 1, 2025.

These include risk-based provisional refunds for exporters, simplified GST registration for low-risk businesses, and the removal of threshold limits for claiming refunds on low-value export consignments.

These steps are designed to accelerate cash flow for small exporters and reduce compliance burdens, particularly in e-commerce-driven models.

The Council also confirmed the operationalization of the Goods and Services Tax Appellate Tribunal (GSTAT), which will begin accepting appeals by the end of September and commence hearings by December 2025.

Finance Minister Nirmala Sitharaman, who chaired the meeting, emphasized that the reforms are part of a strategic overhaul aimed at benefiting the common citizen, bolstering agriculture, and enhancing industrial competitiveness.

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