GST rate change: The government may propose lowering the current goods and services tax (GST) on ghee and butter to 5% from 12%. To simplify the tax and stop tax leakages, the GST Council removed this exemptions from some dairy products in July of last year 2021-2022.
The animal husbandry and dairying department has requested the finance ministry to include the proposal in the GST fitment committee, which will then be presented to the GST Council.
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A kg of ghee costs 70 rupees (12% GST), which is equal to 12 to 14 liters of milk. Farmers could have received ₹5-6 more for their milk, but the 12% GST on ghee forces them to spend more money. In essence, the government taxes both farmers and consumers.
To simplify the tax and stop tax leakages, the GST Council removed exemptions in July of last year 2021-2022. Condensed milk, cheese, butter, and ghee are taxed at 12% while pre-packaged and labeled milk products, such as paneer, curd, lassi, and buttermilk, are subject to a 5% GST.
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But the GST rate on ghee and butter should be equal to cooking oil, which is 5%, so that farmers get the right price for their agricultural produce.
Lowering GST rate on ghee would not only benefit farmers but also help arrest the upward trend in inflation. A reduction in ghee prices would also help curb adulteration and allow farmers to reduce retail prices for milk.
Dairy cooperatives and the dairy sector in India have repeatedly brought up this problem with the government and made various submissions on it. Therefore, government is now thinking to do the GST rate change in the dairy products.
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