The new GST regime on dairy products will hit farmers, entrepreneurs


At a time when the price of dairy products is increasing, the Goods and Services Tax (GST) Council’s decision to impose 5% tax on curd, butter milk and lassi has come as a shock absorber for the dairy sector.

“The dairy sector is a source of livelihood for people in the lower strata of society. GST on high-demand dairy products like curd, lassi and butter will force us to increase prices which may affect uptake by consumers,” says KS Mani, president, Kerala Cooperative Milk Marketing Federation (Milma).

The decision will put a lot of stress on the sector, which is already under pressure due to rising production costs.

“Though farmers have been pressing for an increase in the price of milk and milk products due to the rising cost of production, we have managed without the increase by supporting them,” says Mr. Mani.

“India has topped world milk production with the support of Union and state governments despite being a low profit sector. The current policies will only help big players enter the sector, which will negatively affect small milk producers,” he says.

“To make matters worse, primary dairy cooperatives have been placed under income tax in the last two years, even though they operate on the concept of ‘no profit no loss’.” The move to introduce the tax will hit milk producers. Since this sector is the source of livelihood for many small farmers, the government should protect their interests,” says President Milme.

Milk consumers pay attention to prices. As milk and milk products are essential commodities, the government should consider withdrawing the decision, says Sujith Sudhakaran, CEO, AM Needs, a milk delivery app.

The cost of milk production in Kerala has risen significantly, with the cost of fodder alone increasing by more than 30% compared to the previous season, says TP Sethumadhavan, former director of the Kerala Veterinary and Animal Science University.

“Adding milk value to easy-to-consume products ensures a higher profit margin for dairy entrepreneurs. Consumption of curd and lassi is on the rise in the Kerala market. The new GST tariff will affect both producers and consumers. Moreover, when mechanization is gaining momentum in dairying, the increase in GST on milk processing machinery and agricultural production from 12 to 18 percent may further increase the cost of production,” he adds.



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