How to start a dairy or milk products business in India: registrations and licences

Which structure suits a dairy?

A dairy farm selling raw milk locally can start as a proprietorship. Processing units that pasteurise, pack and distribute need capital and usually form a private limited company or LLP. Farmer-owned models often use a cooperative society under state law or a farmer producer company under the Companies Act, which lets producers pool milk and share profits.

The choice affects funding. Banks and government schemes for dairy infrastructure often support cooperatives and producer companies, while private brands raising equity usually choose companies.

Licences and registrations for dairy businesses

Requirements scale with what you do: a milk collection centre has a short list, while a plant producing paneer, ghee and ice cream has a long one.

How GST applies to milk and milk products

Fresh milk and pasteurised milk are exempt from GST. From 22 September 2025, UHT milk also moved from 5% to nil, and butter and cheese moved from 12% to 5%. Ice cream came down from 18% to 5%. Rates for other items such as ghee, paneer, curd and flavoured milk depend on their exact classification and packaging, so confirm current rates by HSN code.

A dairy selling only exempt milk does not need GST registration, because the threshold counts taxable supplies. Once you add taxable products, monitor turnover, since exempt supplies are included in aggregate turnover for registration purposes.

Food safety essentials for dairy

Milk is a high-risk food. FSSAI standards set fat and solids-not-fat levels for different milk types, and adulteration testing is common. Keep chilling and cold chain records, test incoming milk and finished products, and train staff on hygiene.

Labels on packed milk products must show the type of milk, fat and SNF content where required, FSSAI licence number, dates and storage conditions. Claims like 'A2' or 'organic' need substantiation and, for organic, certification.

Ongoing compliance

Renew FSSAI and pollution consents on time, file FSSAI annual returns where applicable and keep effluent treatment records, since dairy wastewater is a common enforcement focus. Pay farmers through banking channels and maintain procurement records.

Under income tax, income from agriculture is exempt, but dairy farming and milk processing are generally business income. Presumptive taxation under section 58 of the Income-tax Act 2025 may suit small proprietors and firms within the turnover limits.

Procurement and farmer payments

Dairies buying milk from farmers should record quantity, fat and SNF for each supply and pay through bank transfer or UPI. Clear records protect you in quality disputes and support income-tax deductions for purchases.

If you procure through village collection centres, each centre handling milk may need its own FSSAI registration. Chilling equipment, weighing scales and testing machines used for trade should carry valid Legal Metrology verification stamps.

Pitfalls in dairy

Cold chain failures and adulteration findings damage a dairy brand quickly, so testing, temperature logs and documentation are worth the investment from the very first day.

• Assuming exempt milk sales mean no compliance at all; FSSAI still applies.
• Discharging untreated effluent from processing units.
• Applying old GST rates to UHT milk, butter or ice cream.
• Marketing A2 or organic claims without evidence or certification.

Step by step

1. 1Pick the model and structure

   Farm, collection, processing or brand, and the matching entity.

2. 2Choose the site

   Check water availability, effluent options and pollution category.

3. 3Obtain pollution consent

   Consent to establish, then consent to operate for processing plants.

4. 4Apply for FSSAI

   Select the category based on capacity and activity.

5. 5Register as packer

   Legal Metrology registration and compliant labels.

6. 6Register for GST

   When taxable products and turnover require it.

7. 7Set up testing

   Arrange milk testing and product testing with accredited labs.