Starting July 1, Pakistani consumers will have to pay an extra Rs50 per liter for packaged milk due to the implementation of an 18% General Sales Tax (GST) as per the new budget. The tax increase has raised significant concerns within the dairy industry, with sources warning of potentially catastrophic consequences.
Industry insiders caution that the imposition of the proposed 18% GST on packaged milk could result in a drastic contraction of the formal dairy sector, potentially shrinking it by over 70%. The formal sector plays a crucial role in ensuring quality standards and supporting farmers’ livelihoods.
Farmers are already reeling from substantial financial losses, estimated at Rs23 billion, stemming from the government’s mismanagement of wheat imports during the caretaker administration. The new tax could exacerbate their struggles, as industry sources indicate that reduced profitability may lead to a decline in milk purchases from farmers. This, in turn, threatens their livelihoods and hinders efforts to improve living standards through stable and fair trade practices.
The situation is particularly alarming given Pakistan’s nutritional challenges. Approximately 40% of children suffer from stunted growth, 29% are underweight, and 18% experience wasting due to malnutrition. While about 90% of Pakistan’s 240 million people consume fresh, unprotected milk, only 10% use packaged milk, highlighting the potential impact of the tax on a critical food source.
The dairy industry emphasizes its support for taxation to fund national development but calls for equitable policies. “There must be a level playing field for stakeholders to compete,” they stated, underscoring the need for a balanced approach to taxation that does not disproportionately harm the sector.
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