GST Rate Cuts: A Major Boost for Dairy, Food Processing, and Agriculture Cooperatives
The Government of India’s recent GST rationalisation measures are set to deliver significant growth to cooperatives in the dairy, food processing, agriculture, and rural enterprises sectors. Union Minister of Cooperation Amit Shah shared this in a written reply to the Rajya Sabha, highlighting how these changes address inverted duty structures and enhance competitiveness.
Dairy Sector Receives Direct Relief
The dairy industry stands to gain immensely from targeted GST reductions. Milk and paneer, whether branded or unbranded, now attract nil GST, while rates on butter, ghee, cheese, and milk cans (made of iron, steel, or aluminium) have been slashed from 12% to 5%.
Impact on Farmers and Cooperatives
- These cuts make dairy products more competitive, directly boosting margins for over 10 crore dairy farmers and cooperatives.
- Lower prices are expected to increase demand, leading to higher revenue for dairy societies and more surplus passed to farmers—potentially raising the share from 80% to 85% of consumer prices.
- Major players like Amul have welcomed the move, with MD Jayen Mehta noting it will encourage wider adoption of packaged dairy products and sustain incomes for 36 lakh farmer families in Gujarat alone.
Women-led self-help groups and rural enterprises in milk processing will also benefit, gaining better market access and improved livelihoods.
Food Processing Sector Sees Widespread Rate Reductions
Cooperatives in food processing are another key beneficiary, with GST on most items revised to 5%. This includes jams, jellies, fruit pulp, juice-based drinks, chocolates, corn flakes, ice creams, pastries, cakes, biscuits, namkeens, pasta, and coffee—down from 12% or 18%.
Expected Outcomes for the Industry
- Reduced rates will lower household expenditure, stimulating demand especially in semi-urban and rural areas.
- Increased sales and margins for cooperatives, enhancing their market share against unorganised players and building consumer trust in safe, quality products.
- Promotion of growth in the sector, with higher procurement prices for producers and linkages for informal groups and FPOs.
These changes align with the ‘NextGenGST’ reforms under PM Narendra Modi, hailed as a Diwali gift that strengthens the cooperative ecosystem.
Agriculture and Rural Enterprises Get Input Cost Relief
Agriculture cooperatives benefit from corrections in inverted duty structures, particularly in fertiliser manufacturing. GST on key inputs like ammonia, sulphuric acid, and nitric acid has dropped from 18% to 5%, alongside bio-pesticides and micronutrients.
Key Advantages for Farmers
- Lower input costs for fertilisers ensure timely availability and price stability during sowing seasons.
- Affordable bio-based inputs encourage a shift from chemical pesticides, improving soil health, crop quality, and sustainable practices under the Natural Farming Mission.
- Reduced GST on tractors and components aids small farmers in mixed farming, fodder cultivation, and animal husbandry.
- Direct benefits to FPOs, small farmers, and rural enterprises, promoting eco-friendly farming and higher incomes.
Overall, these reforms will bolster cooperatives’ competitiveness, increase demand, and pass benefits to millions, fostering inclusive growth across India’s rural economy.
In summary, the GST rationalisation is a strategic move to empower cooperatives, reduce costs, and drive sectoral expansion. As shared by Minister Amit Shah, it positions dairy, food processing, and agriculture for sustained prosperity. (Word count: 812)
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