Why paneer and cheese are taxed differently in new GST regime

You are not alone if you have ever wondered why the common paneer you add to your curry has become tax-free while the piece of cheese on your favourite burger or sandwich still has a 5% GST.

Despite both being dairy products, the government views them significantly differently in terms of taxes.

Why is there a different tax treatment between paneer and other cheese? GST Council clarifies

Prior to rate rationalisation, paneer sold in other than pre-packaged and labelled form already attracted nil rate.

Therefore the changes have been made only in respect of paneer supplied in pre-packaged and labelled form.

Paneer is an Indian cottage cheese. This is mostly produced in small scale sector. The measure is intended to promote Indian cottage cheese.

In the latest GST Council meeting held on 3 September 2025, several dairy products, including paneer and UHT milk, were given tax relief with significant rate cuts or complete exemption.

All dairy milk, other than UHT milk, were already exempt from GST. Hence UHT milk has been exempted to provide same tax treatment to similar goods. Plant based milk drinks except soya milk drinks attracted 18% GST while soya milk drink attracted 12% GST. The GST rate on plant-based milk drinks and soya milk drinks have now been reduced to 5%.

Dairy and paneer products GST rates

• Ultra High Temperature (UHT) Milk: Zero GST
• Paneer (Chena): Zero GST
• Condensed Milk: 5% GST
• Butter, Other Fats, and Cheese: 5% GST
• Ghee: 5% GST

The tax cuts aim to make essential dairy products more affordable, especially benefiting farmers and rural consumers.