Transforming Food and Freight: The Legal and Economic Impact of India’s 2025 GST Reforms

Posted On - 10 November, 2025 • By - Vipin Upadhyay

Introduction

India’s Goods and Services Tax (GST) framework has entered a new phase of rationalisation with the 56th GST Council Meeting held on September 3, 2025. In a landmark policy decision, the Government introduced sweeping GST reforms for the food processing and logistics sectors, aiming to promote transparency, affordability, and competitiveness.

By placing most food commodities under 5% or NIL tax slabs, and reducing GST on commercial vehicles, packaging materials, and logistics inputs, the reforms seek to remove classification disputes, reduce consumer prices, and streamline compliance for businesses.

These measures mark a significant shift toward a value chain–based tax regime, aligning with India’s broader economic strategies like the Atmanirbhar Bharat Abhiyan, Make in India, and PM Gati Shakti National Master Plan.

Since its implementation in July 2017, GST has replaced a fragmented indirect tax structure with a unified system. Yet, industries such as food processing and logistics remained burdened by rate inconsistencies, classification ambiguities, and disputes on similar products (e.g., paratha vs roti).[1]

The 2025 reforms address these persistent issues through:

  • Uniform classification of similar food products to end interpretational conflicts.
  • Simplified rate structure for essential goods to ease compliance under the CGST Act, 2017 and IGST Act, 2017.
  • Reduction of input tax on logistics and packaging, enabling end-to-end tax efficiency.

From a legal standpoint, this enhances predictability in tax administration and reduces litigation under Section 9(3) (reverse charge mechanism) and input tax credit disputes under Section 16 of the CGST Act.

Food Security and Accessibility: A Fiscal-Policy Synergy

The 2025 GST rationalisation complements India’s ongoing food security initiatives, such as the National Food Security Act (NFSA), Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY), and Price Stabilization Fund Scheme.

By lowering GST on essential food products, the reforms indirectly strengthen these welfare measures by:

  • Reducing consumer expenditure on everyday staples like roti, paratha, paneer, and dairy items.
  • Encouraging food processors and MSMEs to expand production without passing on tax burdens.
  • Enhancing affordability under schemes like Bharat Dal and Bharat Rice, ensuring steady access to essential commodities.

This coordinated fiscal approach demonstrates how tax policy and social welfare can intersect to drive inclusive economic growth.

Key Highlights: GST Reductions on Food Products

1. Essential Food Items (NIL Rate)

  • UHT milk, chena/paneer, pizza bread, roti/chapati, paratha/parotta: GST reduced from 5% or 18% to NIL

2. Processed and Packaged Foods (5% Slab)

  • Namkeen, bhujia, instant noodles, sauces, sugar products, tender coconut water: Reduced from 12% to 5%

3. Dry Fruits and Nuts (5% Slab)

  • Almonds, pistachios, macadamia nuts, dates, figs, guavas, mangoes (non-dried): Reduced from 12% to 5%

4. Dairy and Processed Products (5% Slab)

  • Butter, ghee, condensed milk, cheese, jams, pickles, juices, ice cream: Unified at 5%

5. High-End Goods Rationalisation (from 18% to 5%)

  • Plant-based milk, soups, tea/coffee extracts, chocolates, baked goods: Encourages premium consumption and domestic production.

Packaging and Manufacturing Efficiency

The reduction of GST on packaging materials including paper, cartons, and crates, etc from 18% to 5% is a crucial step toward cost rationalisation and supply chain efficiency.

This benefits:

  • MSMEs and small food processors who rely on low-cost packaging for competitiveness.
  • Exporters, as reduced packaging costs improve price parity in global markets.
  • Consumers, through the pass-through effect of lower shelf prices.
  • The change also reduces working capital blockage and eases input tax credit reconciliation for manufacturers under Rule 36 of the CGST Rules, 2017.

GST Reforms in Logistics and Freight Sector

The logistics and transport sector responsible for moving nearly 70% of India’s goods traffic, is another major beneficiary.[2]

Key Announcements:

  • GST on commercial vehicles (delivery trucks, goods carriers, vans): Reduced from 28% to 18%
  • GST on third-party insurance for goods carriages: Reduced from 12% to 5% (with ITC)

Impact:

  • Lower capital costs for vehicle acquisition.
  • Reduced freight per tonne-kilometre (tonne-km) costs, directly easing inflationary pressure.
  • Stronger MSME participation particularly small fleet owners who dominate last-mile logistics.

This aligns with the PM Gati Shakti National Master Plan, which integrates logistics, transport, and digital infrastructure to enhance India’s competitiveness in global trade.

Global Competitiveness and Supply Chain Integration

With India aspiring to be a $5 trillion economy, the 2025 GST reforms play a pivotal role in building an integrated “farm-to-fork” and “port-to-plate” supply chain ecosystem.

By lowering transaction costs across food and freight, India strengthens its role in global agri-exports, processed foods, cold chain logistics, and e-commerce fulfilment in line with the National Logistics Policy (NLP) and PLI Scheme for Food Processing Industries.

These reforms also complement India’s Free Trade Agreement (FTA) negotiations by improving domestic cost competitiveness.

Conclusion

The GST Reforms 2025 mark a decisive shift in India’s fiscal and industrial policy from complex rate structures to a simplified, growth-oriented, and inclusive tax regime. By lowering GST on essential food products, packaging materials, and transport infrastructure, the Government has effectively reduced costs across the entire consumption and supply chain ecosystem.

This holistic reform strengthens India’s position as a manufacturing and logistics hub, boosts rural and MSME participation, and creates a predictable tax environment conducive to long-term investment.

In the larger picture, the 2025 GST reforms embody the principles of ease of doing business, tax transparency, and economic inclusion, steering India toward a more resilient and self-reliant economy.

[1] https://www.pib.gov.in/FactsheetDetails.aspx?id=149290&NoteId=149290&ModuleId=16

[2] https://www.pib.gov.in/FactsheetDetails.aspx?id=149290&NoteId=149290&ModuleId=16