New GST regime on dairy products will hit farmers, entrepreneurs

At a time when cost of dairying is increasing, the  Goods and Services Tax (GST) Council decision to impose 5% tax on curd, butter milk, and lassi has come as a dampener for the dairy sector.

“Dairy sector is a source of livelihood for people in the lower strata of society. GST on high-demand milk products such as curd, lassi, and butter will force us to increase the prices that may affect the intake by consumers,” says K.S. Mani, Chairman, Kerala Cooperative Milk Marketing Federation (Milma).

The decision will put severe stress on the sector, which is already under strain due to a rise in production cost.

“Even though farmers have been pressing for increasing the price of milk and milk products due to the spiralling production cost, we have been managing without a hike by providing support to them,” Mr. Mani says.

“India has topped world milk production with the support of Union and State governments even though it is a low-profit sector. The current policies will only help big players to enter the sector, which will adversely affect small dairy farmers,” he says.

“To add to the woes, primary dairy cooperatives have been brought under the purview of income tax in the past two years, though they function on ‘no profit no loss’ concept. The move to impose tax will hit dairy farmers. Since the sector is a livelihood source of many small farmers, the government should protect their interest,” says the Milma chairman.

Milk consumers are price conscious. As milk and milk products are essential goods, the government should consider a rollback of the decision, says Sujith Sudhakaran, CEO, AM Needs, a milk delivery app.

The cost of milk production in Kerala has increased considerably, with the price of cattle feed alone rising more than 30% compared to the previous season, says T.P. Sethumadhavan, former director, Kerala Veterinary and Animal Sciences University.

“Value addition of milk to easily consumable products ensure better profit margin to dairy entrepreneurs. Consumption of set curd and lassi is on the rise in Kerala market. The new GST tariff will affect both producers and consumers. Moreover, when mechanisation is acquiring momentum in dairy farming, increase in GST of dairy and agri processing machineries from 12 to 18% may further increase the cost of production,” he adds.