New GST on Butter: From Dairy to Dining – What You Pay
- GST on butter in India is 5% from 22 September 2025, reduced from the previous 12%.
- Butter and other milk fats or dairy spreads classified under HSN 0405 generally attract 5% GST when supplied as goods.
- Butter is not exempt from GST. Unlike fresh milk, butter under HSN 0405 is taxable at 5%.
- The HSN code for butter is 0405, which is relevant for GST invoicing and returns.
- GST-registered businesses may claim Input Tax Credit (ITC) on eligible purchases of butter, subject to applicable ITC rules and restrictions.
Butter is a kitchen essential used in homes, restaurants, and bakeries across India. Whether it’s spread on bread or used in rich curries and baked goods, butter is a high-demand dairy product. This blog explains the GST rate on butter , relevant HSN code , its impact on pricing, and what dairy businesses and consumers need to know.
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Is GST Applicable on Butter?
Yes, GST is applicable on butter under the Indian Goods and Services Tax framework. Unlike some essential dairy items like milk, butter is not exempt from GST. Since butter is considered a processed and packaged dairy product, it attracts a standard GST rate, regardless of whether it’s used by households or commercial kitchens. Learn more about GST on food products for comparison.
New GST Rate on Butter in India
The GST rate on butter was reduced from 12% to 5%, effective from 22 September 2025. Below are the current GST rates for butter (no compensation cess).
| Type of Butter | GST Rate |
|---|---|
| Packaged dairy butter (retail) | 5% |
| Butter used by restaurants | 5% |
| Industrial bulk packs | 5% |
Type of Butter
GST Rate
Type of Butter
GST Rate
Type of Butter
GST Rate
Understand GST on dairy products for related items like cheese and ghee.
Old GST Rate on Butter
(Old GST Rates – Applicable Until 21 September 2025)
Before 22 September 2025, the GST rate on butter was 12%. This rate applied to:
- Packaged butter sold in retail outlets
- Butter used in food processing and commercial kitchens
- Salted and unsalted varieties
| Type of Butter | GST Rate |
|---|---|
| Packaged Dairy Butter (Retail) | 12% |
| Butter used by restaurants | 12% |
| Industrial bulk packs | 12% |
Type of Butter
GST Rate
Type of Butter
GST Rate
Type of Butter
GST Rate
Understand GST on dairy products for related items like cheese and ghee.
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HSN Code for Butter
| Product | HSN Code | Old GST Rate |
|---|---|---|
| Butter | 0405 | 12% |
| Ghee | 0405 | 12% |
Product
HSN Code
Old GST Rate
Product
HSN Code
Old GST Rate
Be sure to apply the correct HSN code in GST invoicing and returns.
Input Tax Credit (ITC) on Butter
Businesses that purchase butter for further use in production, such as bakeries or processed food industries, may claim Input Tax Credit (ITC) on the 5% GST paid, subject to applicable GST rules.
Conditions for ITC eligibility:
- Buyer must be GST-registered
- The purchase must be for eligible business use
- A valid GST invoice with the correct HSN code must be available
- ITC must not be restricted under the applicable GST scheme
Restaurants paying 5% GST without ITC on restaurant services cannot claim ITC on butter used for providing those services.
To understand ITC across more categories, visit what expenses can be claimed as ITC.
Conclusion
The GST on butter is now 5%, reduced from 12% from 22 September 2025. Whether used in daily cooking, food processing, bakeries, or commercial kitchens, butter remains a taxable processed dairy product under GST.
Eligible GST-registered businesses may claim Input Tax Credit on butter purchases, subject to applicable ITC rules. However, businesses operating under schemes where ITC is not allowed, such as restaurants paying 5% GST without ITC, cannot claim such credit.
For additional clarity on food-related taxation, explore GST on food items.
