The Indian government’s latest tax reform has brought plant-based meat and milk alternatives closer to parity with animal proteins.
In a major win for the future food sector, India’s overhaul of its tax framework will narrow the gap between animal proteins and plant-based meat and milk.
The Goods and Services Tax (GST) Council approved the reforms announced by Prime Minister Narendra Modi last month, designed to “enhance the quality of life of every last citizen”.
The move covers a wide range of products across industries like food, cosmetics, homeware, electronics, medicines, and transportation. Among these are vegan meat and milk alternatives, which are now taxed the same way as packaged animal meat and milk beverages.
Tax relief for plant-based foods a ‘progressive’ move
GST is a destination-based tax system that replaced indirect taxes like VAT and service tax across India in 2017, under Modi’s first term as prime minister.
Until now, soy milk, texturised vegetable proteins (a common ingredient in meat analogues), nuts, and prepared fruits and vegetables have carried a GST rate of 12% and other plant-based milk alternatives have incurred an even steeper 18% tax rate.
At the same time, fresh cow’s milk is not taxed, and most fresh meat either has a 5% levy or none at all. With the new reforms, the GST rate on all plant-based milk, meat alternatives and other vegan foods will be 5%.
This puts them on par with several other animal proteins, which have also received a tax cut to 5%. This includes beverages containing milk, butter, ghee and dairy spreads, cheese, as well as sausages and preserved meat and seafood.
Even nutritional yeast and microbial proteins stand to win from the GST changes, with inactive yeast and single-cell microorganisms both seeing GST rates lowered from 12% to 5%.
“The considerable reduction in GST rates for plant-based foods is poised to increase accessibility to alternatives such as plant-based dairy and soy-based plant-based meat,” Astha Gaur, senior regulatory policy specialist at the Good Food Institute India, told Green Queen.
“As the effect of these reductions trickles down to the consumers by making them more affordable, we remain enthusiastic about how this progressive move by the government will positively expand the consumer base for plant-based foods, which has previously been a significant challenge,” she added.
The tax shift is a welcome move for the plant-based industry in India, which still faces labelling restrictions and has previously been attacked by an ad by dairy producer Amul and Mother Dairy, which claimed plant-based milks were not “milk”. The Advertising Standards Council of India struck down three petitions against the dairy giants.
India is hungry for plant proteins
The new tax regulations are set to come into effect on September 22 of this year, and they align with the growing demand for plant-based food in the world’s most populous country.
Despite only 11% having given plant-based meat a go (and 23% having tried milk alternatives), more Indians want to increase their intake of vegan meat analogues (43%) than conventional meat (36%), and two in five want to cut back on the latter.
The market for vegan food grew by 18% between 2021 and 2024, and according to Ipsos, it’s expected to expand 18-fold in the next decade, with plant proteins “set to be woven into everyday meals and snacks, attracting a wider audience beyond vegans”. This will be helped by the fact that 60% of Indians suffer from lactose intolerance, and 37% want to add more plant proteins to their diets.
Protein content and health are the most influential drivers of plant-based food consumption in the country, but affordability is among the biggest barriers, with a quarter of Indians saying oat milk and the like don’t offer value for money.
This is why the GST reforms are so important. “This should not be taken for granted or be seen as a given,” said Abhay Rangan, chief business officer at Senara and former CEO of plant-based dairy brand One Good. “This has been the result of stakeholders in the movement working tremendously hard – continuously making representations to the finance ministry, having dialogue often, and engaging throughout about the needs of startups in what will be one of India’s most important industries.”
Praveer Srivastava, executive director of the Plant Based Foods Industry Association, called it a “progressive move” that supports healthier food choices, environmental sustainability, and the “growth of the plant-based industry in India”.
The fight to lower plant-based meat and milk taxes isn’t just confined to India. Government subsidies have supported livestock agriculture disproportionately across the world, and while some European countries have introduced tax parity for these products, industry stakeholders continue to campaign for the same in many others.
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