ISLAMABAD: The Pakistan Dairy Association (PDA) has issued a stark warning regarding the impact of the current 18 percent General Sales Tax (GST) on packaged milk, claiming it is not only failing to generate anticipated tax revenues but is also actively choking the growth of the dairy industry and impeding efforts towards formal documentation.
Speaking at a media briefing, PDA officials asserted that the high tax rate has led to a significant decline of over 20 percent in sales volume within the formal dairy sector. Consequently, they argue that the government is unlikely to achieve its projected revenue targets due to this contraction in taxable sales.
Call for GST Reduction to Boost Sector and Revenue
The PDA has put forth a compelling case for a reduction in the GST. They estimate that if the GST on packaged milk were lowered to 5 percent, starting from July 2025, it could trigger a 20 percent boost in sales volumes. This, in turn, would lead to increased participation in the formal dairy sector and could potentially grow government revenue by an impressive 22 percent annually. “It becomes a neutral policy in Year 3, and growth-positive from there on,” stated Noor Aftab of Tetra Pak, emphasizing the long-term benefits of such a policy shift.
Threat to Rural Livelihoods and Development
Beyond just industry statistics, PDA leaders expressed grave concerns about the wider implications for rural communities. They warned that the current tax policy threatens to reverse years of vital development work within Pakistan’s dairy farming ecosystem. Rural areas, which are intrinsically linked to the informal dairy sector, are reportedly facing the brunt of declining formal sector engagement.
The Association urged the government to recognize these broader impacts on rural livelihoods, advocating that a revised 5 percent GST could act as a catalyst for inclusive growth across the entire dairy sector, benefiting farmers and consumers alike. The dairy industry awaits the government’s response to these urgent pleas for tax policy revision.
