Finance Bill Brings Relief for Sports Drink Makers
The federal government has removed the 20 percent federal excise duty on some low-sugar sports and hydration drinks in the FY2026-27 budget.
The government approved the change through an amendment to the Finance Bill 2026. As a result, selected mineral water, aerated water, hydration drinks, and electrolyte beverages will no longer face the 20 percent tax.
However, the exemption will apply only to drinks that contain artificial sweeteners or sugar not exceeding 5 grams per 100 milliliters.
Previously, the tax applied to all these beverages. It did not matter how much sugar or artificial sweetener they contained. Therefore, many low-sugar drinks also came under the same tax category as sugary drinks.
Gatorade and Revive Get Tax Exemption
Sources said the decision will benefit sports drink brands such as Gatorade and Revive. PepsiCo owns both brands.
The tax department had demanded federal excise duty on these products for a long time. However, the companies argued that the drinks should not fall under the sugary drinks category.
They said these beverages contain very low sugar levels. Some also contain artificial sweeteners and electrolytes. Therefore, the companies maintained that these drinks support hydration and should not face the same tax as regular sugary drinks.
The government has now accepted this position through the new amendment. Consequently, these low-sugar sports drinks have been excluded from the 20 percent duty.
US Embassy Raised Tax Dispute With Finance Ministry
The issue also drew attention from the US Embassy in Islamabad. The embassy wrote to the federal finance minister and raised concerns over tax disputes affecting multinational beverage companies in Pakistan.
According to sources, the embassy said these disputes were creating serious problems for companies operating in the country. It also urged the Ministry of Finance to resolve customs classification issues and federal excise duty matters.
Moreover, the embassy said that tax relief would support PepsiCo Pakistan’s manufacturing operations. It also linked the issue with future foreign direct investment in Pakistan.
The latest amendment changes the Federal Excise Schedule under the Federal Excise Act. It clearly excludes hydration and electrolyte beverages that support fluid balance and electrolyte replenishment, as long as their sugar or artificial sweetener content remains within the allowed limit.
The decision gives relief to beverage companies. At the same time, it creates a clearer tax difference between sugary drinks and low-sugar hydration products.
