Milk sector’s formalisation: ‘Govt must learn from European, Indian models’

KARACHI: Strongly contesting the proposed imposition of 18 percent GST on packaged milk, Pakistani packaged milk industry has asked the government to learn from the Indian example saying that Indian packaged milk share has gone up from around 20 percent to 45 percent in around a decade because milk in India is not taxed.

India is moving fast towards formalizing the milk sector through favorable tax policies, industry sources revealed.

Industry sources said India produces 230 billion liters of milk and 25 percent increase in packaged milk is almost equal to 100 percent of milk in Pakistan.

“We understand that taxation is an important policy tool to take economy, health, and nutrition in the desired direction, but taxes are mostly applied on non-essential food items,” industry sources said.

In a country like Pakistan, where malnutrition and chronic diseases are staggering in numbers and milk is antidote to both and has a potential to improve overall health of the nation, taxation on packaged milk doesn’t make sense and will further keep the people away from safe and healthy packaged milk, they added.

Although Pakistani food authorities and their scientists believe in it, especially Punjab Food Authority which banned the loose milk in 2018 and the compliance deadline was July 2022. Since there were no conducive business policies in favour of packaged milk, the ban never materialized, though legally, it is banned in territorial jurisdiction of Punjab, they said, adding that putting packaged milk in the sales tax regime will favour loose milk, which is not good for health, neither for nutrition nor for the sector and economy.

They said that in a country where 90 percent of milk is loose or in informal sector and the people have a consensus to move towards formal milk supply chain (packaged milk), putting packaged milk at a disadvantage against loose milk would be an antagonist to the direction.

They said even in countries where there is no loose milk, the milk (packaged milk) has either no tax or reduced tax. The closest example where loose milk is also in significant proportion is India, where 45 percent is packaged as against Pakistan, where only less than 10 percent is packaged.

Sharing tax details of developed countries, they said several developed European countries have either no tax or less tax on packaged milk versus other packaged foods. In most of the European countries VAT on packaged milk is around 5 percent to 10 percent while VAT on other foods in these countries is around 20 percent to 27 percent.

Copyright Business Recorder, 2024