Changes in GST Rates in 2025	Food Items
0% [No change]	Commonly consumed and not-packaged foods such as fresh fruits and vegetables, tea, coffee, salt and jaggery.
5% to 0%	Ultra-high temperature (UHT) milk; pre-packaged and labelled chena or paneer; Indian breads (khakhra, chapati or roti), pizza bread.
18% to 0%	All other Indian breads (such as paratha, parotta).
12% to 5%	47 foods and beverages based on 4-digit HSN Codes, such as, namkeens, dried and preserved fruits, jams and jellies.
18% to 5%	23 foods and beverages based on 4-digit HSN Codes, such as, soups, cakes, biscuits, chocolates and waters.
18% to 40%	Non-alcoholic beverages such as 0% alcohol by volume (ABV) beers and spirits.
28% + 12% compensation cess to 40% [No change]	Pan masala, aerated waters with added sweetener, caffeinated beverages and carbonated beverages of fruit drink or with fruit juice.

Source: GST Council of India 

Despite rising incomes and shifting consumer preferences, India’s processed food consumption remains low, accounting for just 9.84% of rural and 11.09% of urban expenditure in 2023–24 (HCES). While the country is the world’s second-largest producer of fruits and vegetables, most of the output remains unprocessed. In contrast, countries such as Thailand, the Philippines, and Viet Nam have seen much faster growth in their food processing sectors. Moreover, majority of the businesses are in the unorganised/informal sector. As per the Annual Survey of Unincorporated Sector Enterprises (ASUSE), nearly 23 lakh food processing enterprises were in the unorganised/informal sector in 2023-24. One of the reasons for lower food processing and large informal market is the high tax on processed foods borne by the formal sector. Before the recent GST restructuring, India’s indirect taxes on food were among the highest in the world, far exceeding those in countries such as Singapore and Australia. This has restrained the growth of the formal food processing sector to an annual rate of just 5.35%. The new GST restructuring brings hope for the sector, aiming to lower costs, easing compliance, and encouraging formalisation, which could stimulate both industry growth and consumer benefits.

Positive Outcomes of the GST Restructuring: 
First, the new GST rates place majority of food items in 5% slab (Merit Rate), making India’s indirect taxes on food among the lowest in the world. The revised rates came into effect on September 22, 2025, and within few days several FMCG brands—including Amul, Dabur, Tropicana announced price reductions across key products to pass the benefit on to consumers. These reductions ranged from Rs 4 to nearly Rs 50 depending on the product category, signalling early transmission of tax reforms into retail pricing. Lower prices are also expected to boost consumption, especially for packaged foods.

Table 2: Price Adjustments Following GST Rate Revision
(September 2025) – Select Examples

Second, the tax cuts are expected to leave the industry with additional savings that can be reinvested in expansion, technology and Research and Development. Simpler slabs and reduced filing complexity could accelerate the formalisation of the sector and also lower compliance barriers for micro, small and medium enterprises (MSMEs), making it easier for them to enter and scale within the formal economy. Over time, this is likely to strengthen value chains and improve product standards.

Negative Outcomes of the GST Restructuring:
The GST cuts may reduce government revenue. According to the latest data released by the GST Council on November 1, 2025, the collections in October 2025, stood at Rs 1.96 lakh crore, marking a 4.6% year-on-year increase—the slowest growth recorded since the pandemic. In the coming months, this may result in lower GST revenues. The government’s gross revenue loss from the cuts is estimated at Rs 48,000?crore, while the Centre’s net share is projected at Rs 3,700?crore (SBI, 2025). This potentially leaves less funding for government investments in infrastructure or social sectors, such as healthcare and education and may also constrain the government’s ability to provide subsidies to this industry. While the government revenue is likely to decrease, the health expenditure is expected to rise. 

The health experts and consumers have long argued for nutrition-linked taxes, which has been completely ignored in the current GST regime, with substantial reductions on foods high in salt, sugar and fat (HFSS foods). It diminishes the incentive for companies to reformulate, innovate or invest in healthier products. For instance, the GST on products such as namkeen, chips and instant soups— categories extremely high in salt, has been reduced to just 5%, a move that raises serious public-health concerns. Excessive salt consumption is a major risk factor for hypertension and cardiovascular diseases (CVDs), the incidence of which are rising sharply in India. CVDs are now the leading cause of death and accounted for 2,873,266 deaths in 2021. An ICRIER–RTSL study shows that the salty packaged foods category is projected to grow at over 12% CAGR between 2025 and 2034, increasing the burden of hypertension and CVDs and might push up the government health expenditure under schemes such as Ayushman Bharat.

The GST restructuring also fails to incentivise healthier product development within the fizzy drinks/carbonated beverages category. Regardless of their sugar content, all such beverages have been placed in the highest tax slab, along with an additional 12% sin tax, clubbing them with products like tobacco. This discourages companies from producing healthier alternatives, including fruit-based beverage options as urged by PM Modi in September 2014. This is a big miss in the current GST restructuring. Ideally, the 12% cess on fizzy drinks, treating them as sin goods irrespective of their sugar content, should be removed. To conclude, while the revised regime is likely to benefit the processed food industry overall, the effects on formalisation within the food processing sector, the growth in demand for formal packaged foods, and the implications for government revenue will become clear only after a year.