Instant coffee to be cheaper as GST reduced from 18% to 5%

The morning cuppa is going to be cheaper and more affordable thanks to the Union Government’s decision to reduce the GST on coffee from 18% to 5%. The new tax regime will come into effect from September 22.

The coffee community has unanimously welcomed the GST Council’s decision and termed the move a ‘progressive step‘ to directly benefit consumers and the industry alike.

Rajat Agarwal, CEO, Barista Coffee told The Hindu, “It’s a welcome move from the government to revisit the rates. Considering we still as an industry are not eligible for GST input credit, this will reduce the sourcing cost. Further, more money with consumers will boost spending at large, which should benefit retail.”

Rana George, MD of Bengaluru-based Kelachandra Coffee that owns close to 7,000 acres of coffee plantations in Chikkamagaluru and Wayanad, said, “The government’s decision to reduce GST on coffee from 18% to 5% will significantly uplift the Indian coffee industry. From farm to cup, a positive impact will be felt across the industry.”

According to Ms. George, this will make coffee more affordable and accessible, thereby accelerate domestic consumption and open new avenues for market growth. “The reduction in tax will create a fairer playing field for growers, processors, and retailers, ensuring benefits across the entire coffee value chain. This is happening at a time when India is not only one of the world’s largest producers of coffee but is also trying to emerge as one of the vibrant consumer markets in the world.”

Ms. George also said, “Any relief in taxation would stimulate demand for coffee in the domestic market, encourage innovation and strengthen India’s standing in the global specialty coffee markets.”

Harpreet Singh, Partner, Indirect Tax – Deloitte India, said, “Coffee-related products, such as roasted chicory, coffee substitutes, and coffee concentrates, have now been moved to the 5% GST slab. While this change is expected to benefit consumers through lower retail prices, it poses a short-term challenge for retailers holding inventory purchased at higher tax rates. Nonetheless, the rate cut is likely to make coffee more affordable and boost overall consumption.”

Praveen Jaipuriar, CEO, CCL Products (Continental Coffee), was of the opinion that lower taxes meant greater affordability, which would in turn drive wider consumption, particularly during the festive season when families come together, and spending peaks.

“This rationalisation is not just about price correction. It is about fueling demand, supporting volumes, and strengthening confidence in the domestic market. For us in the FMCG sector, such reforms align with the vision of inclusive growth by ensuring that everyday indulgences, like a cup of coffee, remain within reach for every consumer,” he said.

“This decision would positively impact both household sentiment and overall economic momentum. This will also be helpful for the economy in the long run as increased consumption will be part of GDP growth.”

Srikanth Rao, Director, Bayars Coffee, said, “Currently, filter coffee is taxed at 18%. With the new taxation bringing this down to 5% means consumers will be able to buy instant coffees and instant coffee liquids from super markets for a much affordable price.”

Vikram Khurana, CEO, Kaapi Solutions that focuses on coffee machines and barista training, said, “Coffee has been steadily emerging as a preferred beverage among India’s youth and urban consumers. This move would further accelerate that growth by making it more affordable and accessible. For cafés, roasters, and retailers, this reduction eases financial pressures, enabling them to reinvest in quality, innovation, and customer experience.

More importantly, he said, this wasn’t just a tax reform, but a catalyst that would fuel consumption and indeed a step in the right direction towards nurturing India’s vibrant coffee culture.

Published – September 04, 2025 04:45 pm IST