Today is 18th July 2022. GST of 5% will be levied on healthy and hygienically packed curd, buttermilk, lassi and Paneer from today. Covid-19 created a paradigm shift in the eating choice of the public at large. Dairy products due to high quality of their protein emerged as best in class super foods.
There was a huge investment in the dairy sector in the last 2-3 years. The target of Most of the investment was to produce curd, buttermilk, paneer, and cheese . Buttermilk became a poor man’s soft drink and paneer became a common man’s meaty source of proteins.
Food inflation in India currently is at an all time high. The industry as well as dairy farmers are struggling to meet both ends. At this crucial moment, the GST council imposed 5% GST on the most nutritious dairy products meant for masses. The GST council passed on the responsibility of this decision to some experts who have suggested the government to do so.
Who is guiding the policy makers ?
Who are these experts ? When we asked the Indian dairy association and leading dairy players in the country then none of them had any clue about it happening. The industry was rather looking forward to a decrease in GST on butter and ghee . The industry excluded approach of the policy makers has made few things very clear.
a. It is better to remain in an unorganised sector than organised one.
b.It is better to work at lower scale than at large scale.
c. It is better to make and sell products in loose in hygiene compromised manner rather than to hygienically pack the dairy products
d. It is better to not do value addition in milk and stick to selling milk only.
e. It is better to remain as a dairy farmer only as the moment you become a processor ; you will be taxed.
f. It is cumbersome to consider fresh dairy products distribution as a livelihood opportunity.
Stay packed Stay taxed
Todays’ Mantra is stay packed stay taxed. Then it may be mass products like curd, buttermilk, Lassi or even cereal, grains etc. However there is still some scope for the industry to start selling their curd in-a-26-Lit bucket or paneer in-26-kgs block . Anything above 25 lit/25 kgs doesn’t come under the pre-packed and pre-labeled category in metrology. The government may release some clarifications later in this regard as these are the grey areas.
Stay hygienic Stay Foolish
There is no law applicable to thousands of food operators who are making paneer in most unhygienic conditions and adulterating it with vegetable oil. It is estimated that more than half of the paneer being sold loose in the market is unhygienic and adulterated. There is no need for these players to pay tax or write anything on their label, rather there is no label as they are selling their product wrapped in a muslin cloth.
The government may not get more than Rs 400-500 Crores by bringing these products under the ambit of GST but such actions will definitely demotivate the industry as well as farmers and they will think twice before pressing the accelerator of growth.
I request policy makers to be inclusive and understand the requirements of farmers , industry and consumers first before taking any decision. With most of the stakeholders passing on the gst to consumers, this decision has not done good for anyone in the complete dairy value chain. The government also will not gain much in their tax collection.