‘India’s liquid gold is taxed unfairly’: Experts demand GST cut on ghee from 12% to 5%

The country’s dairy leaders have urged the government to slash the 12% GST on ghee, saying it’s an unfair burden on a product that’s deeply tied to India’s culture, diet, and rural economy.

While essential dairy products like curd and buttermilk attract a 5% GST, ghee – often hailed as ‘liquid gold’ – remains taxed at more than double that rate, creating what experts describe as a distorted and damaging policy. 

“The 12% GST on ghee hurts industry margins and public health, favoring untaxed, adulterated products,” said Dr RS Sodhi, President of the Indian Dairy Association (IDA). “A 5% GST would boost demand for safe, branded ghee, curb counterfeits, and protect our nutritional heritage.”

Ghee plays a central role in India’s dairy economy, with roughly 30% of all milk converted into ghee annually. In 2023, the ghee market was valued at Rs 3.2 lakh crore and is projected to more than double by 2032. Despite its significance, the elevated tax rate has triggered concerns over affordability, adulteration, and market fairness.

“Ghee’s 12% GST makes affordability tough, limiting innovation in fortified variants and sustainable packaging,” said Ravin Saluja, Director of Sterling Agro. “It’s a cultural staple, not a luxury.”

Historically, ghee was either exempt from VAT or taxed at 5% in most states, including Tamil Nadu, Gujarat, Uttar Pradesh, and Rajasthan, the experts said, adding that the shift to a 12% GST has triggered several unintended consequences: increased adulteration as producers blend ghee with cheaper oils; a heavier financial burden on consumers; fraudulent invoicing practices; and unfair competition, especially for genuine brands and small-scale producers battling counterfeit products.

Paras Dairy MD Rajender Singh warned that the high tax drives consumers toward unsafe alternatives. “A 5% GST would make quality ghee affordable and ensure a transparent market, preserving ghee’s nutritional value and dairy sector resilience.”

Industry leaders stress that lowering the GST rate would not only protect public health but also support millions of dairy farmers and formalise the sector – ultimately strengthening government revenues through increased compliance.