The existing 12% GST on ghee creates a notable disparity, as other essential dairy products such as curd and buttermilk are subjected to a considerably lower 5% tax. Compounding this imbalance, even imported edible oils, some of which are frequently implicated in ghee adulteration, benefit from a 5% GST. This uneven taxation directly disadvantages the formal ghee sector, squeezing profit margins and inadvertently fostering unregulated market activities, as highlighted by R.S. Sodhi, President of the Indian Dairy Association (IDA).

A critical consequence of the elevated GST on ghee is its role in promoting adulteration and fueling the growth of the unorganized market. With a mere 15% of India’s colossal ₹3.2 lakh crore ghee market falling under the organized, tax-compliant sector, the vast majority operates through local, unregulated channels often distributing unlabelled and unchecked products without GST payment. Reducing the tax, advocates argue, would incentivize these entities to formalize, leading to improved product quality and safety for consumers.

Beyond the immediate benefit to consumers through increased affordability, a reduction in the GST to 5% is envisioned as a direct financial boost for millions of dairy farmers. Industry experts project that such a tax cut could translate into an increase in milk prices by ₹2-2.5 per litre, significantly enhancing farmer earnings. This pivotal change would provide much-needed economic relief and bolster livelihoods across the sprawling Indian dairy sector.