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Taxing for health: Will GST reforms bring the intended impact or unintended consequences?
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Saturday, 20 September, 2025, 16 : 00 PM [IST]
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Dr Zeeshan Ali
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The recent Goods and Services Tax (GST) reforms affecting the food and beverage industry, essential household items, medicines, and even agricultural equipment go beyond fiscal adjustments. They reveal how policymakers are beginning to connect taxation with nutrition and public health priorities.
The GST Council slashed taxes on several plant-based essentials—unsweetened plant-based milks, fruits, nuts, seeds, and texturised vegetable proteins. It also raised taxes on clear health hazards such as tobacco products and sugar-sweetened beverages (SSBs).
As part of the revised framework, popular food delivery and quick-commerce platforms like Swiggy, Zomato, and Blinkit were also subjected to an 18% GST on delivery services. While this may raise the cost of convenience-driven food purchases, it underscores how taxation may be used to shape both dietary choices and access to food—nudging India toward a more nutrition-conscious food economy.
This rationalisation comes at a critical moment. India, home to 17.78% of the world’s population, has the second-highest number of people living with type 2 diabetes (about 101 million), representing 14% of the global burden. Cardiovascular disease is now the leading cause of death, responsible for nearly 1 in 3 fatalities, according to the Registrar General of India’s latest Cause of Death Report. Meanwhile, obesity rates have nearly doubled over the past two decades, underscoring the urgency of reshaping our food systems.
Yet, the affordability and convenience of health-promoting foods often remain as significant barriers. Diets rich in fruits, vegetables, whole grains, and legumes are associated with lower risks of obesity, type 2 diabetes, cardiovascular disease, and certain cancers. While plant-based foods are associated with better health outcomes, the accessibility, affordability, and aggressive marketing of less healthful options—such as animal products, oils, candy, and baked goods—continue to drive high consumption of calorie-dense foods. The World Health Organisation and other leading health authorities recognise that regular consumption of calorie-dense foods—often high in saturated fats—significantly increase the risk of obesity and noncommunicable diseases, including cardiovascular disease, type 2 diabetes, and cancer.
This move, therefore, represents an opportunity to revive healthier dietary patterns in a modern context. However, these tax cuts on healthy foods alone will not change India’s food environment; their impact is magnified when paired with disincentives for foods that actively drive disease risk.
Calorie-dense, unhealthful foods—including meat, poultry, dairy, eggs, and foods made from them (such as sweets, frozen meals, mutton and cheese pizza)—should not be eligible for tax rebates. Research shows why these foods are difficult to resist: A 2023 BMJ study found that when refined carbohydrates and fats are combined, they have a stronger pull on the brain’s reward system than either nutrient alone, making ultra-processed foods particularly addictive. India has already used higher taxes to curb other addictive products like aerated drinks, tobacco, and alcohol. Extending the same principle to ultra-processed foods would bring tax policy in step with public health goals.
Global precedents show that price interventions can be powerful levers to change consumption patterns. Mexico’s tax on nonessential energy-dense foods, for instance, led to a 5.1% decline in sale of these foods within the first year, while the UK’s sugar levy spurred manufacturers to reformulate products, cutting sugar in soft drinks by almost 30%. These cases demonstrate that fiscal tools can successfully discourage harmful consumption while incentivising healthier alternatives.
These changes in policy offer businesses both opportunities and challenges. Businesses that have made significant investments in highly processed or sugary products may need to expand into plant-based alternatives or speed up research and development of healthier formulations. Retailers might also adjust, rearranging promotions and shelf space to showcase reasonably priced healthy options.
Indian companies may find that these reforms encourage them to develop innovative products based on regional strengths, like millet-based snacks or plant-protein beverages, much like how UK beverage manufacturers reformulated their products following the sugar levy. Companies that are forward-thinking can use these changes as a springboard for expansion, balancing public health objectives with financial success.
The advantages extend well beyond health. Lower rates of diabetes, obesity, and heart disease would reduce health care costs and support a more productive workforce, strengthening economic resilience. Environmentally, even a partial shift toward plant-based diets would cut greenhouse gas emissions from livestock production, which accounts for 14.5% of global emissions, according to the Food and Agriculture Organisation (FAO).
The government’s decision to reduce GST on plant-based milks, fruits, nuts, and seeds is an encouraging step. But it should be treated as a beginning, not the end of the conversation. Fiscal policy is one lever among many, and its effect depends on how people and businesses respond to it.
To make these reforms meaningful, government and industry will need to stay in dialogue. Tracking what people actually eat, how markets adjust, and what health outcomes follow will show whether the policy is working as intended. Businesses, for their part, can share consumer insights that help fine-tune these measures.
If both sides engage in that way, tax policy can gradually play a role in nudging diets toward healthier and more sustainable choices, without losing sight of economic realities.
(The author is nutrition scientist at Physicians
Committee for Responsible Medicine)
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