GST Rate on Milk, Paneer, Curd, and Other Dairy Products with HSN Code

The Goods and Services Tax (GST) has made magnificent changes to the tax structure of India; hence, such changes attract various industries, namely dairy. Then again, it is of great importance for consumers, producers, and industries to know the GST on milk, curd, paneer, etc. Here follows the complete discussion on the GST rate on milk and dairy products, their respective HSN codes, and how the industry is affected by them.

What is the GST Rate on Milk?

Milk-the staple for Indian households-really has a position under the GST on dairy products. While fresh and unflavored milk remains exempt from GST, many processed products such as flavored milk and condensed milk are subject to GST. The distinction is highly relevant for both consumers and dairy producers as it affects pricing and calculation of taxes on products.

Moreover, businesses could rely on aids like the GSTIN Status Validator, which is able to check for compliance and transparency for transactions on such products as milk and other dairy products.

Overview of GST Rate on Milk, Curd, and Other Dairy Products

Changes to the GST rates on the types of processing and forms of dairy products include milk, paneer, curd, and others. Basic dairy products, such as fresh milk and curd, will always be exempted from the tax as per the norms of the government to keep the items accessible. However, value-added products such as cheese, butter, and condensed milk are taxable and attract GST rates in the range of 5% to 18%.

This differentiation would suffice to keep basic commodities accessible. It would also ensure that luxury or processed products from dairy resources go into taxation. Businesses that classify their products into appropriate HSN codes should do so to avoid any penalties and errors during tax filing. Read further to know the GST on milk Products.

Also Read: GST Refund Process, Claim and Time Limit  

List of Milk and Dairy Products with % of GST Rate and HSN Code

This is a complete table about the GST rate on milk and other dairy products along with their HSN codes.

This table gives a quick idea about the GST category which would help the consumers and businesses know their tax requirements.

How to Claim ITC (Input Tax Credit) on Dairy Products

This is ITC calling to businesses that allow offsetting of GST paid input against output tax liabilities. A business or a person selling or producing dairy products has particular guidelines that they have to follow when claiming that:

Taxability of Products: The product must be a taxable product for claiming ITC such as milk, cheeses, and butter but not including fresh milk for the reason that it is exempt.
Proper Documentation: Purchase invoice, GST registration, and HSN code must tally with the filings.
Timely filing: submitting documents by set deadlines to avoid penalties, denials, or legal issues.

Also Read: Input Tax Credit (ITC) Under GST with Example

ITC encourages efficient use that eventually results in lower costs for dairy businesses, consuming competitive prices.

Impact of GST on Dairy Producers and Consumers

Mixed impacts of GST have been thrown on both producers and consumers in the dairy sector:

For Producers:

Compliance Burden: Dairy companies are required to comply and maintain records to the hilt for the ITC and GST returns.
Price Uniformity: Standardized taxation has eliminated cascading taxes, making prices more transparent.

For Consumers :

Essentials Affordability: Basic products such as fresh milk and curd are kept outside the list of taxable goods, making them affordable.
Costlier Processed Products: Value-added items like flavored milk and cheese are subjected to a higher GST rate, which is reflected in the retail prices.

Still, balancing affordability with tax revenue generation is critical for managing the effect of GST on the dairy sector.

How to Calculate GST for Dairy Products

The following steps would be required for calculating GST on milk products and other dairy products:

Identify the Taxable Nature: Determine whether the product is exempt from tax or taxable (refer to the table above).
Find Out the Rate Applicable to the Goods: Use the appropriate GST rate for that product within the category (e.g., 12% for flavored milk).
Calculate Tax: Put the GST rate to the base price of the product: 
GST= (Base Price X GST Rate) ÷ 100 
Add GST to Selling Price: Price = Base Price + GST

For instance, when the base price of flavored milk is ₹100 and the GST rate at which it will be charged is 12%, the GST comes to ₹12 and thus, it will amount to ₹112 in total.

Changes in GST Rates for Dairy Products

So far, the government changed rates under the GST applicable on dairy products to address concerns of industry and affordability for consumers:

Initial Implementation: Most basic dairy products were exempt, while value-added items fell under 12%-18%.
Later Changes: Industry-reduced process-led revisions in minor ways, allowing processed items to be competitive in the country with imported produce prices. 
Now: The government is still tracking dairy products in 2024 to maintain checks over revenue and the public's interest.

Such developments help keep a business updated with changes in pricing strategies and compliance.

Also Read
GST on Electric Vehicles
GST on flight tickets

Conclusion

It is important to understand the GST on milk products to assist the business in determining tax compliance and pricing strategy in the dairy sector. While fresh milk and mandatory items are exempt, processed products do contribute to GST revenue. Businesses should keep themselves updated with the changes in the rates, including using the GSTIN Status Validator for their compliance, and be very efficient in claiming ITC to manage costs.

Frequently Asked Questions (FAQ)

How do I claim ITC on dairy products in my GST returns?

To claim the Input Tax Credit (ITC) on dairy products, ensure that these products have been bought without the associated taxes under GST. You will need to document the GST-compliant purchase invoices and HSN codes of the product. Also, ensure that you reflect these transactions in your GSTR-2A or GSTR-3B returns. After verification, the GST paid on inputs can, against tax liability, be adjusted onto the output of taxable products.

Which dairy products are eligible for ITC under GST?

There are dairy products on which Input Tax Credit is applicable under the GST regime; referred to as taxable items include flavored milk, condensed milk, butter, ghee, and cheese, among others. Other products like fresh milk and unprocessed curd are exempt and therefore, they do not qualify for ITC since GST is not paid when buying them. It is also necessary for businesses to classify products correctly so that ITC can be determined, thus avoiding compliance issues.

How much GST is applicable on flavored milk?

The percentage of GST on flavored milk is 12%. Flavored milk is classified under HSN code 0402 and is thus treated as a processed dairy product. It is levied tax according to this classification. Tax would not charge fresh milk but flavored milk is priced because of the ingredient processing and packaging.

Are there any GST exemptions for dairy products?

Some of the dairy products exempted from GST include fresh and unprocessed milk, unbranded paneer, and unflavored curd. This provision ensures that cheap, yet basic dairy products are available to consumers, particularly to those in rural and low-income households. However, any branded or processed version of the above products will be taxed based on rates ranging between 5 and 18 percent.

Is there GST on milk powder or dairy powders?

Yes, there exists a complete imposition of GST on milk product powder and other dairy powders like skimmed milk powder. These are taxed under an 18% GST rate and can be classified under HSN code 0402. These products fall under taxable commodities mainly because of their industrial nature and the capability of shelf-stable processing, though they are most often found in the food-processing sector.

What is the GST rate on butter and ghee?

Butter and ghee attract GST at the 12% tax rate, classified under HSN code 0405, as processed dairy products. This is the most ideal rate at which processed but necessary items can contribute revenue to the tax coffers while remaining affordable to consumers.

What is the GST rate on unprocessed milk?

Fresh milk from farms and supply to homes goes without GST. Classified under HSN code 0401, the exemption of fresh milk goes in tandem with the goal of the government to ensure affordable basic nutrition. Processing entails either adding flavors or fortification, which makes the product liable to GST.