18% sales tax on milk proposed
Consumers and the food industry in Pakistan may face a spike in milk prices as the government considers imposing an 18% excise duty on packaged milk in the upcoming budget. The move comes at a time when the food industry is struggling with high tariffs on juice products.
Sources told The Express Tribune that the Federal Revenue Council (FBR) has proposed the tax action, which aims to collect more than Rs 30 crore annually in other taxes starting from the 2023-24 financial year. However, Finance Minister Ishaq Dar has expressed concern about the impact on consumers, given the country’s history of inflation.
The introduction of such a tax would be a double-edged sword for the food industry, which is still reeling from the imposition of a 10% federal tax five months ago. This obligation has a negative impact on businesses and farmers, resulting in reduced demand for commodities such 18% salsas mangoes. Ironically, while Prime Minister Shehbaz Sharif conducts mango diplomacy with the Turkish President, his government’s tax policies are hurting the country’s farmers and food industry.
Sources said the FBR’s proposal includes removal of zero-rated facilities for the dairy sector. Currently, dairy producers have the right to request a rebate on their purchases. Canned milk usually costs about 260 cents per litre, and the 18% tax will add 46 cents per litre.
In discussing the removal of the zero-rating facility, the finance minister expressed concern over the social impact of the milk tax, sources said. He also considered the implications of an 18% excise duty on liquid milk, which could prompt bosses to raise prices to consumers. Based on these observations, sources indicate that the government is unlikely to support the FBR proposal.
Inflation in May reached 38%. Imposing a food tax, especially in an election year, could hurt the government. A zero cap for the dairy industry was set in the 2021-2022 budget to support its growth. Taxing these products will increase costs for consumers and could lead to a decrease in demand, which affects dairy farmers and the industry as a whole.
