‘High tax on packaged juices stifles growth, hurts economy'

Business Recorder

20-05-2025

LAHORE: The formal packaged juice industry in Pakistan continues to reel under the weight of an excessive 20% federal excise duty (FED) in addition to the existing 18% general sales tax (GST) imposed since the 2023-24 budgets.
This steep tax burden has not only throttled the industry's growth but also led to unintended consequences for the economy, consumers, and rural fruit farmers, claimed the industry sources.
They said once projected to exceed PKR 72 billion in annual sales in FY 2022-23, the formal juice sector has witnessed a 45% decline, with current sales slumping to around PKR 42 billion. The contraction has resulted in shrinking business activity, rising unemployment, and underutilization of production capacity. No new investments have flowed into the sector over the past two years, industry stakeholders said.
More concerning, the price hikes triggered by these taxes, where up to 42% of a juice pack's cost now goes toward taxes — have driven many consumers towards cheaper, unregulated alternatives. These low-cost, low-quality beverages, often lacking any real fruit content, are flooding the market through the mushrooming informal sector which evades taxation entirely.
The consequence has been lose-lose scenario. Government revenue projections have fallen short due to plummeting sales volumes in the formal sector. Meanwhile, rural fruit farmers are also facing severe setbacks. The industry, once a major purchaser of local produce, has significantly reduced its procurement. For instance, mango purchases dropped to 20,233 tons last year, down from 31,000 tons in 2017-18, said the sources.
This decline in demand has led to increased fruit wastage as Pakistan's high perish ability rates and lack of post-harvest infrastructure already make it difficult for farmers to sell at fair prices during peak seasons. The formal juice sector had historically mitigated this by purchasing large volumes and investing in farmer training and better handling practices — a support now rapidly diminishing.
Experts also warn that this taxation policy undermines public health. Packaged juices when produced with real fruit content offer essential vitamins, antioxidants, and hydration, particularly important in a country facing growing nutrition-related health issues. With formal, safe, and regulated products priced out of reach, consumers are left to choose from potentially unsafe and unregulated beverages with no nutritional value.
The undocumented sector, which has grown significantly in the past year, operates without oversight from food safety authorities. Not only does this compromise public health, but it also further erode government revenue that could have been collected had these players been part of the formal economy.
In light of the industry's current situation, a representative of the Fruit Juice Council said they are not asking for abolishing the FED or even halving it. 'Realising the ground realities, we have requested the government to reduce the FED by 5%. That 5% reduction will give the industry space to grow again and as a result will also bring in more revenue for the government. If the current level is maintained, the sales will fall further with a further dip in government revenues,' he added.
Stakeholders also call for a stronger crackdown on the undocumented sector, recommending the formation of a joint task force of government officials and industry representatives. Such a body, they believe, could help identify and regulate illicit manufacturers, ensuring product safety and fair competition.
Copyright Business Recorder, 2025