Starting July 1, 2024, Pakistani consumers will face an additional Rs50 per liter cost for packaged milk due to the implementation of an 18 percent General Sales Tax (GST) in the budget.
Industry insiders have warned that this tax could severely impact the formal dairy sector, potentially shrinking it by over 70 percent if not rescinded.
The indirect sales tax is also expected to result in a loss of at least Rs23 billion for farmers, who are still recovering from poorly planned government wheat imports.
Stakeholders in the packaged milk industry have expressed concern over the government’s plan to levy the 18 percent sales tax starting in the next financial year. They argue that the formal dairy sector plays a crucial role in improving farmers’ livelihoods by ensuring timely purchases of their milk.
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Despite Pakistan being one of the largest producers and consumers of milk globally, 40 percent of its children suffer from stunted growth, 29 percent are underweight, and 18 percent face severe malnutrition due to poor nutrition.
Currently, about 90 percent of Pakistan’s population consumes fresh, unprocessed milk, with only 10 percent using packaged milk. The new tax is likely to reduce this number further, hindering the government’s efforts to formalize the economy.
Industry representatives stress that while they support taxation for national development, there needs to be a fair playing field for all stakeholders. They urge the government to withdraw the proposed sales tax and implement policies that incentivize and support the entire dairy supply chain, ensuring consumers have access to safe and healthy milk products.
