The Indian dairy industry is urging the government to reduce the GST on ghee from 12% to 5%, arguing that the high tax is hurting farmers and allowing unorganised players to sell adulterated products without regulation.

RS Sodhi, President of the Indian Dairy Association, stated that ghee is a pure farmers’ product. Yet, it’s taxed at a higher rate than imported edible oils, which attract just a 5% GST. “This higher tax directly affects farmer income,” he said.

He added that only 15% of India’s Rs 3.2 lakh crore ghee market is organised and falls under the GST system. The rest operate in the unorganised segment, where local brands often sell without bills or quality checks. “Walk into a store in any tier-2 or tier-3 city and you’ll find numerous unlabelled ghee packs,” he said.

Before GST, ghee was taxed at a rate of just 4–5% VAT in most states. Following the rollout of GST, the rate increased to 12%, targeting the formal sector. But this may be backfiring. “We are losing out on GST revenue as most of the market remains outside the system,” Sodhi explained.

Despite these issues, demand for ghee is growing at an annual rate of 8–9%. He said ghee is wrongly seen as a luxury item. “It’s part of everyday meals for all—from delivery boys to Mercedes owners,” he noted.

The Dairy Association has raised this concern in four GST Council meetings, but it says there has been no progress. The problem is that lower taxes could result in reduced revenue. But Sodhi believes otherwise. “If GST is cut to 5%, the full market can come under the tax net—generating Rs 15,000 crore annually, far more than the current Rs 5,000–6,000 crore,” he claimed.

He also said the cut could directly benefit farmers. “On every kilo of ghee, farmers pay Rs 70–80 as GST. A 7% cut could raise milk prices by Rs 2–2.5 per litre—giving a much-needed boost to farmer earnings,” he added.

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