KARACHI: Pakistani packaged milk consumers will pay an additional Rs50 per litre starting July 1, 2024 due to the implementation of an 18 percent General Sales Tax (GST) in budget.

The proposed 18 percent sales tax on packaged milk in the new budget could prove to be disastrous and, if not withdrawn, may shrink the size of the formal dairy sector by more than 70 percent, industry sources said.

Also, the imposition of an indirect sales tax instead of a direct income tax is expected to inflict a loss of at least Rs23 billion on farmers who are still reeling from the government’s ill-planned wheat imports during the caretaker setup, they added.

GST on infant food, milk in phases

The industry will not be able to buy milk from the farmers as this tax will erode their profits, they said.

The manufacturers and other stakeholders that are linked to the country’s small but documented packaged milk industry are concerned over the government’s plan to levy an 18 percent sales tax on packaged milk from next financial year which will start from July 01.

The formal dairy sector helps farmers improve their living standards through guaranteeing the timely purchase of their milk produces, they said.

Despite being one of the world’s largest milk producers and consumers, Pakistan is a country where 40 percent children are suffering from issues like abnormal height, 29 percent are underweight while 18 percent are scrawny because of malnutrition.

About 90 percent of more than 240 million Pakistanis consume fresh unprotected milk while only 10 percent use packaged milk.

This number will further go down, which will be a huge blow for the government’s efforts to document the economy,“ they said.

“The dairy industry is a staunch supporter of taxation for the country’s development, but there must be a level playing field for the stakeholders to compete, they said.

They demanded of the government to withdraw the proposed 18 percent sales tax on packaged milk and devise policies that could incentivise and help the whole supply chain of dairy industry ensure that the consumers have easy access to pure and healthy milk products.

Copyright Business Recorder, 2024