ISLAMABAD: The imposition of 17 percent sales tax on the dairy products would have a revenue impact of over Rs 5 billion on the dairy sector for 2021-22.

Industry sources told Business Recorder that the 10 percent sales tax was applicable on certain dairy products like cream, butter, yogurt, cheese, dairy powder and tea whitener etc. In the budget (2021-22), the Federal Board of Revenue (FBR) has imposed 17 percent sales tax on dairy products. The industry was expecting restoration of the zero-rating facility, but the government had imposed a 17 percent sales tax on dairy products having serious implications on the health sector.

During the budget exercise, the dairy sector had asked the government for its support through positive measures in the budget 2021-22 including zero-rating for the dairy sector. The budget 2021-22 has negatively impacted the dairy sector with over and above Rs 5 billion impact due to a raise in sales tax from 10 percent to 17 percent.

Within the three years period, the impact of revenue on the dairy sector would go upto Rs 15 billion.

The taxation measures would also impact the milk value chain, especially the livelihood of farmers and the Prime Minister’s agenda of nutrition.

They added that the dairy and milk products lead to a healthy nation but with high taxation it reduces consumption of nutrition.

The Overseas Investors Chamber of Commerce and Industry (OICCI) and the Pakistan Dairy Association had proposed restoration of the zero-rating regime on the dairy sector in the budget (2021-22).

The industry had proposed the government to re-transpose the dairy products to the fifth schedule of the Sales Tax Act 1990 and resume the Zero-Rating facility for the dairy sector.

Copyright Business Recorder, 2021