GST on Milk and Dairy Products – GST Rate

Goods and Services Tax (GST) has significantly transformed the indirect tax system in India. For students pursuing a GST Course, understanding the GST implications on essential commodities like milk and dairy products is extremely important. Since milk is a daily necessity in almost every Indian household, clarity about the GST rate on milk and related dairy items is crucial for consumers, traders, and accounting professionals.

In this blog, we will explain the GST on dairy products, the applicable HSN codes, and the key compliance points that every accounting course student or GST professional should know.

Overview of GST on Milk in India

Milk is considered an essential commodity in India. To protect consumer interests and keep basic food items affordable, the government has kept most varieties of fresh milk exempt from GST.

???? Milk GST Rate India

The Milk GST rate in India is as follows:

• Fresh milk (not processed, not packaged, and not branded) – 0% GST (Exempt)

• Pasteurized milk (unbranded) – 0% GST

• UHT milk (Ultra High Temperature processed) – Generally 0% GST

• Condensed milk – 12% GST

• Flavoured milk – 12% GST

So, when discussing the GST rate on milk, it is important to differentiate between fresh milk and processed or value-added milk products.

HSN Code for Milk GST

Under GST, goods are classified using HSN (Harmonized System of Nomenclature) codes. These codes help determine the correct tax rate.

???? HSN Code for Milk GST

• HSN Code 0401 – Milk and cream, not concentrated and without added sugar

• HSN Code 0402 – Milk and cream, concentrated or containing added sugar

• HSN Code 0403 – Buttermilk, curd, yogurt, kefir

The HSN code for milk GST plays a critical role in GST return filing and invoice preparation.

GST on Dairy Products

While fresh milk is exempt, many processed dairy products attract GST. Let’s break down the GST on dairy products:

???? 1. Butter and Ghee

• GST Rate: 12%

• HSN Code: 0405

???? 2. Paneer

When discussing GST on paneer HSN, it falls under:

• HSN Code: 0406

• GST Rate: 5% (if branded and packaged)

• Loose/unbranded paneer may be exempt depending on supply conditions.

???? 3. Ice Cream

• GST Rate: 18%

• Considered a luxury or processed food item.

???? 4. Flavoured Milk

• GST Rate: 12%

• Treated as a value-added product.

???? 5. Curd, Lassi, and Buttermilk

Recent amendments brought some packaged and labeled curd, lassi, and buttermilk under GST:

• GST Rate: 5% (if pre-packaged and labeled)

This classification has created confusion among small dairy businesses, making professional knowledge of GST on dairy products very important.

GST Rate on Milk vs Processed Dairy Products

One of the most common questions asked by students in a Taxation and GST Course is:

Why is fresh milk exempt, but processed dairy items are taxable?

The answer lies in value addition. Fresh milk is considered an essential commodity. However, once milk undergoes processing (flavouring, packaging, branding, adding sugar, etc.), it becomes a value-added product and attracts GST.

So, while the GST rate on milk is 0% in most basic cases, value-added dairy items attract GST ranging from 5% to 18%.

Impact on Businesses

Understanding the Milk GST rate India is not just important for consumers but also for:

• Dairy farmers

• Milk cooperatives

• Retailers

• Supermarkets

• Accountants

• GST practitioners

Input Tax Credit (ITC)

Businesses dealing in taxable dairy products can claim Input Tax Credit on:

• Packaging materials

• Transportation

• Cold storage services

• Machinery used in dairy processing

However, if a business deals only in exempt goods like fresh milk, ITC cannot be claimed. This concept is a key topic in every  GST and Accounting Course.

GST Compliance for Dairy Traders

For dairy traders and manufacturers, compliance includes:

• Correct use of HSN code for milk GST

• Proper invoice generation

• Filing GSTR-1 and GSTR-3B

• Maintaining stock records

• Applying the correct GST on paneer HSN

Even a small mistake in classification may lead to penalties. That’s why practical exposure in a Taxation and GST Course is essential.

Frequently Asked Questions (FAQs)

1. What is the GST rate on milk in India?

The GST rate on milk is 0% for fresh, unprocessed milk. However, processed or flavoured milk may attract 12% GST.

2. What is the Milk GST rate India for packaged milk?

If it is fresh pasteurized milk without value addition, it is generally exempt (0%). However, flavoured or condensed milk is taxable.

3. What is the GST on paneer HSN?

Paneer falls under HSN Code 0406. The GST rate is generally 5% for branded and packaged paneer.

4. Is GST applicable on dairy products?

Yes, GST on dairy products varies:

• Paneer – 5%

• Butter & Ghee – 12%

• Ice cream – 18%

• Packaged curd/lassi – 5%

Conclusion

The GST rate on milk in India is largely 0% to protect consumers and keep essential goods affordable. However, once milk is processed or value-added, GST applies depending on the product category and HSN classification.