ISLAMABAD: The sales tax zero-rating on local supplies of dairy products including milk/fat filled milk would remain intact in the upcoming budget (2023-24).
Budget makers told Business Recorder that no proposal is under consideration to impose sales tax on milk or any other dairy product at the domestic stage or local supplies. Therefore, the new taxation measure has no revenue impact of sales tax on dairy products, officials added.
According to the sources, zero-rating was brought back in 2021-22 to extend support for milk and dairy sectors growth, however taxation on these essential products would increase their prices and lead to reduced demand, affecting dairy farmers. Under this scheme, dairy products are exempt from input sales tax.
This helps to make these products more affordable and can lead to increased demand for dairy products, which in turn has ripple effect on consumers, dairy farmers (incremental milk procured) and industry besides government with increased revenues through indirect taxes such as income tax, corporate tax etc.
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When contacted, Ali Ahmed Khan, Chairman Pakistan Dairy Association said that the favourable taxation policy has resulted in a win-win situation for government, farmers and consumers. The Pakistan Dairy Association remains resolute in its commitment to delivering safe and nutritious milk to consumers while creating favourable conditions for farmers and contributing to the nation’s economic prosperity.
Currently, dairy manufacturers are entitled to claim refunds on the inputs they purchase. An 18% tax would amount to an additional cost of Rs 30-40 on various product categories. Milk and dairy-based nutrition solutions can play an important role in addressing malnutrition in Pakistan.
“It is important to consider their affordability of fortified dairy products in addressing malnutrition in Pakistan. While dairy products can be an important source of nutrition, they may not be accessible to all segments of the population if further taxes are imposed on dairy products, particularly those living in poverty, therefore affordable safe dairy nutrient is the solution provided by dairy companies with the support of government,” said Prof Dr Talat Pasha, Vice-Chancellor, University of Education Lahore.
According to the World Food Programme, Pakistan has one of the highest rates of malnutrition in the world, with an estimated 43.7% of children under the age of five being stunted, 17% being wasted, and 31.5% being underweight. Malnutrition is a serious challenge in Pakistan that is increasing the health bill
of the nation by 10% per annum, particularly in rural areas where access to nutritious food may be limited.
Prof Dr Saeed Akhtar, Dean, Faculty Food Sciences Bahauddin Zakariya University, Multan said that the malnutrition is a serious challenge in Pakistan, particularly in rural areas where access to nutritious food may be limited. Dairy-based nutrition can play an important role in addressing malnutrition in Pakistan. The government must take immediate and corrective actions towards dairy sector in country.
Meanwhile, zero-rating plays a crucial role in fostering the development of Pakistan’s dairy industry.
Present tax regime has shown remarkable growth in the dairy sector. Despite the country’s current annual milk production capacity surpassing 60,000 million tons, only a mere 6 to 7 percent undergoes processing and packaging.
Farmers will lose because of low demand of packaged milk and dairy products resulting in poor livelihood of a farmer. There are 10 million people connected with dairy sector which will be deprived due to low demand.
Copyright Business Recorder, 2023
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