The production from dairy industries are spread on a large scale throughout the India.. It is the most intensive employer plus the best employer for the landless labour in India. Milk contributes close to the 1/3 of gross income of rural families and in the case of these without land, nearly half of their gross income.

India ranks first in milk production , accounting for 18.5 % of world production, achieving an annual output of 146.3 million tons during 2014-15 as compared to 137.69 million tons during 2013-14 recording a growth of 6.26 %. Whereas, the Food and Agriculture Organization (FAO) has reported a 3.1 % increase in world milk production from 765 million tons in 2013 to 789 million tons in 2014.

The per capita availability of milk in India has increased from 176 grams per day in 1990-91 to 322 grams per day by 2014-15. It is more than the world average of 294 grams per day during 2013. This represents a sustained growth in availability of milk and milk products for the growing population Dairying has become an important secondary source of income for millions of rural households engaged in agriculture.

High rate of GST , if applied, would have direct implication on milk producers. Dairy is perhaps the only industry that is able to pay to the milk producer about 70% of what is charged from the consumer. No other food processing industry in India is able to meet such high expectations of the farmers.

It is apprehended that high GST would incite the industry to reduce the milk prices paid to the milk producer. High rate of GST might also increase the consumer prices of dairy products substantially. The consumer would have a tendency to reduce the consumption of processed dairy foods as well as milks. If the consumer moves more towards the traditional vendor, the organised dairy sector that has been wresting the market of vendors, would contract in size and consequentially reduce its reach to the milk producer. This would halt the expansion and investment in the organised dairy sector including the cooperatives.


According to the existing taxation regime there is no tax on any of the fresh dairy products like raw milk, pasteurized–packaged milk, dahi, chachh, lassi and their variants. None of the dairy products attract excise duty except for the sterilized-sweetened-flavoured milks that also in a very few states. Mandi fee that once was levied on ghee across India has been abolished except in Uttar Pradesh and Rajasthan and that too has been reduced to 2% only. Value-added tax is levied at 2-5% on milk powders, 5% on chakka (basic raw material for shrikhand), table butter, cream, and UHT milk packed in cartons.


Dairy products:


Fresh Milk




Chena or Paneer




Milk Powder




Butter and other Fats


Condensed Milk


The government has taken a farmer centric approach in the proposed GST regime. It should create a special class for the dairy industry by exempting all types of liquid milks, sterilized milks, dahi, chhachh, lassi, shrikhand, paneer and so on from levy of GST and has put milk powder, yoghurt, and other fermented or acidified milk and cream in 5% rate slab. Recovery of low tax through dairy sector should not be considered as a loss to the national exchequer but an investment that would spur growth in milk production, ensuring national food and nutritional security and enhancing rural prosperity.

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