ISLAMABAD: The government is seriously considering 5 percent reduction in Federal Excise Duty (FED) on juices in coming budget (2025-26) with minimum revenue implications on FED collection during next fiscal year.
It is reliably learnt that the budget makers are reviewing proposal of the Ministry of Commerce, Federal Board of Revenue (FBR) and other stakeholders in this regard.
The Fruit Juice Council has asked that the government should reduce the FED rate on the formal juice industry to 15%. The proposed rate of FED will ensure that the industry recovers from the slump it is in and also increase the government revenue.
Senior officials said the 5% reduction asked by the industry makes sense because at a 15% FED, the industry sales will also start to recover in addition to an increase in revenue for the government.
The 20% FED (on top of existing 18% GST) imposed on the formal packaged juice industry since 2023 continues to stall the industry’s growth. Decreasing sales volumes of 45% have also meant that in FY 2024-25, the government’s revenue projections fell short. The Fruit Juice Council, a body representing the formal juice industry, is asking for a 5% FED reduction in Annual Budget 2025-26 to ensure a win-win situation for both the industry and the government.
Ministry of Finance has been informed that fruit-based juices are a healthier option and are promoted so by Food Authorities since they contain the goodness of fruits. In line with local regulations, fruit drinks have minimum 5% fruit content, nectars have 25%-50% fruit content and pure juices have 100% fruit content.
Industry crashed after 20% FED imposition (in addition to 18% GST). The sales were projected to grow to more than PKR 71 billion in 2022-23. However, with the imposition of 20% FED on juices (in addition to 18% GST) since the Annual Budget 2023-24, industry sales have plunged by 45%. Sales over the last year have fallen to around PKR 42 billion.
This shrinking business size has also negatively impacted fruit farmers and pulp processors since the fruit procurement volumes have dropped to a below 2017 procurement volumes; only 20,233 tons of mangoes were purchased last year against 31,000 tons purchased in 2017-18.
In addition, the imposition of 20% FED (in addition to 18% GST) is impacting affordability of the products produced by documented players. This means consumers are effectively paying around 42% of the price as taxes on a pack of juice. This has resulted in a large proportion of consumers shifting to low-priced, low-quality and possibly unsafe alternatives offered by the undocumented sector, which is more than 25% of the industry size.
The formal Packaged Juice industry also shows great potential for increasing exports. Currently, packaged juices are exported to more than 30 countries across the world, with the potential to increase them. However, if the industry fails to get back on the growth trajectory, exports will also end up suffering.
Copyright Business Recorder, 2025
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