How dairy brands are coping with the GST rationalisation

The central government has reduced GST on dairy products from 18% to 5%, but this revised pricing has not yet been implemented. When we spoke to a dairy brand major, the spokesperson said, "It is still work in progress." Meanwhile, a wave of innovation is sweeping through India's dairy industry, with companies using advanced packaging and streamlined supply chains to move beyond home regions and capture national markets. This strategic shift is being led by brands like Milky Mist, Lotus, and Paras Dairy, who are demonstrating that a focus on product integrity and smart logistics can overcome the traditional barriers of entry.

Milky Mist, the Tamil Nadu-based brand, showcases its commitment to quality through an automated plant that operates with no human touch, adhering to international standards such as ISO 40000 and Halal. To ensure products like mozzarella retain their quality during long-distance transit to markets like Maharashtra, the company "utilises individual quick freezing (IQF) at minus 40 degrees." This process is paired with a nitrogen flush in the packaging to mitigate the impact of temperature fluctuations and maintain product integrity, a critical innovation that allows a south-based company to supply products to distant markets confidently.

In Rajasthan, Lotus is prioritising sustainable packaging to align with growing consumer and environmental consciousness. According to Parth Asija, the brand's packaging development manager, the company is transitioning to "100% recyclable packaging across its product lines," including using low-density polyethylene (LDPE) for fresh dairy and eliminating BOPP films from its mono cartons. The brand is also moving towards gable top packaging to further reduce its plastic footprint, while its beverage products use PP (polypropylene) bottles and recyclable aluminium cans.

With the launch of their Galicia Cheese range, Paras Dairy is targeting the high-volume hotel, restaurant, and catering (HORECA) segment. According to CMO VPS Malik, the company is using "IQF technology to prevent lump formation and ensure uniform quality" for its mozzarella and other cheese variants, which is crucial for B2B clients. The company’s flexible and fully automated packaging lines are designed for efficiency and to maintain hygiene standards.

The success stories of these companies are further bolstered by regulatory advancements in India, particularly the implementation of GST 2.0. This tax reform simplifies the tax structure, with most essential dairy items moving to a 5% or nil GST slab, down from previous rates as high as 12%. For instance, UHT milk and pre-packaged paneer are now exempt from GST, while products like butter, ghee, and cheese have moved to the 5% slab. This reduction directly benefits consumers by making products more affordable and is expected to boost consumption significantly. 

For the dairy industry, said an industry expert, this shift helps the organised sector compete more effectively with the unorganised market by making branded products more price-competitive. It further streamlines logistics by reducing tax complexities at state borders, allowing for faster and more efficient transport of goods and reducing overall costs for companies. 

This enhanced ease of doing business, combined with the innovative packaging and supply chain strategies adopted by companies like Milky Mist, Lotus, and Paras Dairy, is paving the way for a new era of growth and national expansion in the Indian dairy sector.