GST on Milk, Paneer, and Curd: HSN Code and GST Rate

The 47th GST Council meeting happened in June 2022 and recommended several changes to GST rates on the supply of various goods and services, including dairy products. Accordingly, it decided to remove the exemption granted to pre-packed and labelled curd, UHT milk, paneer, honey, and jaggery, among other things. Hence, these products attract GST rates ranging from 5% to 18%.

In the 53rd GST Council meeting, the Council recommended that all milk cans (of steel, iron, and aluminium) irrespective of their use will attract 12% GST. This change will come into effect once notified by the CBIC.

Taxability of Production and Sale of Milk, Paneer, and Curd under GST 

The GST Council has withdrawn the exemptions granted to certain dairy products to rationalise the levy of GST and prevent tax leakages. These changes went into effect on 18th July 2022.

As a result, pre-packaged and labelled milk products, including paneer, curd, lassi, and buttermilk, will now be taxed at 5% GST. Additionally, ultra-high temperature (UHT) milk will also be taxable at 5%. Furthermore, dairy products, such as condensed milk, cheese, butter, and ghee, will be taxable at 12% GST.

However, fresh milk and pasteurised milk will continue to be fully exempt under the GST regime. Similarly, as long as paneer, curd, and buttermilk are sold loose, i.e., without any pre-packaging and branding, they will not attract any GST.

GST Rate on Milk, Paneer, and Curd with HSN codes

GST rates on milk products, including cheese, cream, and curd, are covered in Chapter 4 of the GST Act. We tabulate the applicable GST rates on dairy products and their HSN codes below.

 *Recommended in the 53rd GST Council meeting. It will come into effect from the date notified by the CBIC.

How to Calculate GST on Milk, Paneer, and Curd?

From 18th July 2022, fresh and pasteurised milk, which is not sweetened or concentrated, will not attract any GST tax. However, UHT milk will be taxable at 5% GST. To illustrate, if the MRP of UHT milk is Rs.60, then

GST = Rs.60 * 5% or Rs.3 

Likewise, on pre-packaged and labelled items, such as paneer and curd, a 5% GST will be applied. For instance, if a branded packet of paneer or curd costs Rs.120, then

GST = Rs.120 * 5% or Rs.6

Input Tax Credit Claims for Milk, Paneer, and Curd

As per Section 16(1) of the CGST Act, a registered taxable person may claim an input tax credit (ITC) on goods and services used to further the business as a seller of these dairy products. However, Section 17(5) of the CGST Act imposes various conditions for when ITC cannot be claimed, which are detailed here. 

Amendments to Charge GST on Milk, Paneer, Curd

The milk products, including curd and paneer, have been exempt from tax since the GST law came into being. However, milk GST rates have been revised by the 47^th GST Council meeting due to concerns over rate rationalisation, with the compensation mechanism (for states) coming to an end. 

The matter was exacerbated further by the reports of revenue leakages due to the exemption of GST on some pre-packaged food products. Several companies, which weren’t registered, but were selling products under their brand name, had been selling goods without any GST levy. As a result, the GST Council recommended levying GST on these pre-packaged and labelled products.

Additionally, some of the previous clarifications and amendments made to the GST levy on some milk products have been encapsulated below.

Fortified Toned Milk

As per CBIC Circular No. 52/26/2018-GST, published on 9^th August 2018, toned milk that has been fortified with vitamins, such as vitamins A and D, will not attract any GST. Fortified toned milk is covered under HSN code 0401.

Khoya/Mawa

As per F. No. 332/2/2017 –TRU, dated 7^th December 2017, Khoya or mawa is classified as concentrated milk under HSN code 0402, therefore attracting a GST levy of 5%.