India’s food processing industry is set to benefit from a sweeping Goods and Services Tax (GST) overhaul, with the GST Council’s 56th meeting approving major rate cuts effective September 22, 2025. The revised structure collapses the previous four-slab system into two primary rates—5 percent for merit goods and 18 percent for standard goods—alongside a 40 percent rate for sin and luxury items.
Staple items like ultra-high temperature (UHT) milk have been made entirely tax-free, while processed foods such as condensed milk, almonds, pasta, chocolates, ice cream, jams, soups, and plant-based milk drinks now fall under the 5 percent slab. Previously, many of these products were taxed at 12 or 18 percent. The rationalization is expected to reduce retail prices, stimulate consumer demand, and catalyze investment and employment across the food sector.
The move corrects long-standing inverted duty structures, where inputs were taxed higher than finished goods, thereby easing liquidity constraints for micro, small, and medium enterprises. It also resolves classification disputes—such as those between packaged and loose paneer or parathas—by aligning similar goods under uniform tax rates.
Beyond rate cuts, the Council has approved procedural reforms including streamlined registration, simplified return filing, and provisional refund mechanisms for inverted duty claims. The rollout of the Goods and Services Tax Appellate Tribunal (GSTAT) is expected to expedite dispute resolution and reduce litigation costs.
The Ministry of Food Processing Industries projects that the reforms will trigger a virtuous cycle of consumption, investment, and employment. Farmers and food processors are likely to see increased income through expanded infrastructure, higher levels of value addition, and reduced post-harvest losses. The overhaul marks a significant step toward a simplified, growth-oriented tax regime that supports both consumers and industry.
