Page 4 - Dairy Dimension - July Aug 25

| Volume 1 | Issue 5 | July-Agu 2025 MARKET UPDATE | Volume 1 | Issue 5 | July-Agu 2025

GST Reset: A Defining Moment Crucially, these reforms arrive ahead of the
festive season – traditionally a peak period for
ghee, paneer, and sweet-making ingredients.
for India's Dairy Sector For organised players, this is an opportunity to
consolidate market share from the fragmented
unorganised sector.
Outlook: Towards Inclusive Growth
A Structural Shift in Taxation emphasised the dual benefit:
The GST reset should be seen as more than
On 3 September 2025, the Goods and Services Tax (GST) “This move makes commonly consumed items more
Council ushered in a landmark reform for India's food affordable in price-sensitive areas, while also giving fiscal policy. It is a lever for:
and dairy industry. The new structure rationalises the farmers better income stability and the confidence to · Nutritional security – improving access to
earlier four-tier system into a streamlined two-slab invest in cattle care and feed. Over time, this uplift protein and calcium across socio-economic
regime, with essentials largely brought under nil or 5% translates into a better quality of life for dairy farming strata.
GST. For dairy, the impact is immediate and far-reaching: families.” · Farmer empowerment – generating stable

· Paneer (pre-packaged) and UHT milk are now exempt With over 80 million dairy farmer households engaged in demand and incentivising better consumers, it means more milk, paneer, ghee, and
(0%). production, even a modest rise in branded consumption productivity. butter at fairer prices. For farmers, it offers stability and

· Ghee, butter, butter oil, and cheese have moved strengthens procurement networks, ensures offtake, · Formalisation – narrowing the grey market and reinvestment in productivity. For businesses, it
from 12% to 5%. and underpins farmer livelihoods. strengthening consumer trust in quality. represents a structural advantage in building stronger
brands and supply chains.
· Other value-added dairy categories such as ice cream Formalisation and Supply Chain Gains · Sector expansion – unlocking higher volume growth,
have also been reduced to 5%. India's dairy sector has long operated in two parallel which analysts expect to outpace the broader FMCG The new GST regime is therefore not just a tax reform –
This reset is more than a tax cut; it is a recalibration of streams: a vast informal supply chain with low market in the medium term. it is a catalyst for the next phase of India's dairy
ascendancy, where affordability, quality, and inclusivity
affordability, competitiveness, and sectoral compliance but attractive pricing, and a formal branded India's dairy economy, valued at nearly INR 19 trillion, is converge to reshape both demand and supply.
formalisation. market competing under higher tax and regulatory entering a new cycle of affordability-driven growth. For
costs. The GST rationalisation narrows this gap, creating
Affordability and Consumer Access
an inflection point for formalisation.
For the average Indian household, dairy staples are non-
negotiable. Even a 5–7% price reduction changes Deepak Jolly, Chairperson of the Indian Food & Beverage
purchasing behaviour. The zero-rating of paneer and Association (IFBA), framed the change as:
UHT milk, and the halving of GST on ghee and butter, will “A watershed moment that simplifies compliance,
ease monthly grocery bills across income groups. expands affordability, and encourages innovation across
the food and beverage sector.”
Mrs. Bhuvaneswari Nara, Vice Chairperson and
Managing Director of Heritage Foods, noted: By levelling the field, the reforms are expected to:
“These essentials touch nearly 100% of Indian · Draw more consumers into the formal sector,
households. The reforms not only lighten the monthly improving food safety and trust.
grocery bill but also allow branded products to compete · Reduce incentives for tax evasion and adulteration.
more effectively with unorganised players. Heritage · Encourage investment in distribution, cold chain, and
Foods will pass on the full benefit to consumers and farmer extension services.
scale capacity to capture the expected market For processors, the shift also means scale economics:
expansion.”
higher volumes across paneer, ghee, and butter allow
Such measures directly address the protein and tighter integration of procurement, logistics, and retail
nutrition gap in India, making high-quality dairy more distribution, further lowering costs.
accessible to families that had previously cut back or Strategic Implications for Dairy Businesses
substituted with inferior alternatives due to cost
pressures. The tax relief provides headroom for companies to
Rural Multiplier Effect reinvest in capacity, innovation, and farmer
development. Heritage Foods has already confirmed
The most profound growth is likely to occur in semi- capacity ramp-ups, while others such as Parag Milk
urban and rural India, where dairy consumption is Foods are focusing on strengthening farmer linkages.
deeply embedded in diets but constrained by price Dairy boards and cooperatives are expected to leverage
sensitivity. A few rupees saved per litre or per packet can lower tax incidence to expand branded portfolios and
unlock substantial incremental demand. upgrade infrastructure such as chilling centres and
Devendra Shah, Chairman of Parag Milk Foods, packaging lines.

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