In a move set to benefit millions of Indian consumers, the 56th GST Council meeting has announced the removal of the 5% Goods and Services Tax (GST) on packaged milk, effective September 22. This decision is expected to trigger a significant reduction in retail prices across major milk brands, potentially lowering costs by ₹3-4 per litre.

Impact on Major Brands

Industry giants like Amul and Mother Dairy are poised to adjust their pricing in response to this tax exemption. Consumers can anticipate the following changes:

• Amul Gold and Mother Dairy full-cream milk, currently priced at ₹69.00 per litre, are likely to see a reduction to ₹65.00-66.00 per litre.
• Similar price cuts are expected across various milk categories, including toned milk and buffalo milk.

Broader Implications for Dairy Products

The ripple effect of this GST waiver could extend beyond just milk:

• Other dairy products such as curd, paneer, and butter might also see price adjustments.
• The timing of this price reduction, coinciding with the festive season, could potentially boost demand for dairy products.

Consumer Benefits and Market Dynamics

Industry executives have indicated that dairy companies intend to pass on the full tax benefit to consumers. This move is expected to have several positive outcomes:

1. Increased Affordability: The price reduction will make packaged milk more accessible to a broader consumer base.
2. Demand Stabilization: Smaller towns, where price sensitivity is higher, may see stabilized demand for packaged milk products.
3. Festive Season Boost: The timing of the price cut could drive higher consumption during the upcoming festive period.

Looking Ahead

As the implementation date of September 22 approaches, consumers and industry watchers will be keen to observe how quickly and uniformly these price reductions are applied across different brands and regions. The move underscores the government's efforts to make essential commodities more affordable and could have far-reaching effects on the dairy industry's growth and consumer behavior in the coming months.

While the immediate impact is clear, the long-term effects on the dairy sector's competitiveness and overall market dynamics remain to be seen. Consumers, however, can look forward to more affordable dairy products in their shopping baskets very soon.

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:

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.