Dairy Stocks Surge as GST Council Slashes Rates on Key Products
Major dairy company stocks rose up to 7% following the GST Council's decision to reduce tax rates on essential dairy products. UHT milk, chhena, and paneer will now be tax-free, while butter, ghee, cheese, and other dairy items will see GST reduced from 12% to 5%. The new rates will be effective from September 22. Industry leaders expect this move to boost demand, especially in rural and semi-urban areas. Mother Dairy plans to pass on the benefits to consumers. This change is part of a broader GST restructuring, moving to a simplified two-slab structure of 5% and 18%, with a special 40% rate for luxury goods.
*this image is generated using AI for illustrative purposes only.
Shares of major dairy companies experienced a significant boost on Thursday following the Goods and Services Tax (GST) Council's decision to reduce tax rates on essential dairy products. The market responded positively to this move, with stocks of Dodla Dairy, Parag Milk Foods, and Hatsun Agro witnessing gains of up to 7%.
GST Rate Cuts on Dairy Products
The GST Council has approved substantial tax reductions on a range of dairy products, making them more affordable for consumers:
| Product Category | Old GST Rate | New GST Rate |
|---|---|---|
| UHT milk, chhena, paneer | 5% | NIL |
| Butter, ghee, cheese, dairy spreads, condensed milk, ice cream, milk cans | 12% | 5% |
These revised rates are set to take effect from September 22, potentially boosting demand for dairy products across the country.
Industry Response
Devendra Shah, Chairman of Parag Milk Foods, welcomed the move, stating that the reduction in GST rates will make commonly consumed dairy items more affordable. He emphasized that this change could particularly benefit price-sensitive consumers in rural and semi-urban areas, potentially driving up demand for branded dairy products.
In line with the government's decision, Mother Dairy has announced its intention to pass on the benefits of the GST reduction directly to consumers, further enhancing the potential impact on market demand.
Broader GST Reforms
The dairy product rate cuts are part of a larger GST restructuring effort. The GST Council has approved a simplified two-slab structure:
- Standard rates of 5% and 18%
- A special rate of 40% for luxury goods
This new structure will replace the existing system, which included 28% and 12% slabs, streamlining the tax framework for businesses and consumers alike.
Market Impact
The stock market reacted positively to these announcements, with several dairy companies seeing significant gains:
- Dodla Dairy
- Parag Milk Foods
- Hatsun Agro
These companies saw their share prices increase by up to 7%, reflecting investor optimism about the potential for increased consumer demand and improved profitability in the sector.
The GST rate cuts on essential dairy products are expected to have far-reaching effects on both the industry and consumers. As companies pass on the benefits of reduced taxation, it could lead to increased affordability and consumption of dairy products, particularly in price-sensitive markets. This move by the GST Council aligns with broader efforts to simplify the tax structure and boost economic activity in key sectors.
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