FBR links cut in FED on juices with submission of post-dated cheques
ISLAMABAD: Federal Board of Revenue (FBR) Chairman Rashid Mahmood has linked reduction of federal excise duty (FED) on juices from 20 to 15 percent in budget (2025-26) with submission of post-dated cheques of the FED to be collected in the next fiscal year.
During the meeting of National Assembly Standing Committee of Finance held here on Thursday, juice industry pleaded case for reduction in the FED on juices in the coming budget.
The FBR chairman, Thursday, conveyed to the juice industry to deposit post-dated cheques of the FED in case FBR proposed reduction of FED on juices from 20 to 15 percent in budget (2025-26).
'High tax on packaged juices stifles growth, hurts economy'
The industry was surprised to hear such a strange proposal from the tax authorities of submission of the post-dated cheques. The industry representatives stated that how post-dated cheques could be submitted of the FED to be collected on sales to be taken place during the next fiscal year.
The FBR chairman responded that it is the claim of the industry that the reduction in FED would increase volumes and ultimately raise tax collection during next fiscal year. The industry should submit post-dated cheques to substantiate its claims.
The FBR chairman added that 'we have to impose taxes in cases where we will give relief to the taxpayers to overcome the revenue shortfall. In case of relief to any sector/industry, there should be some alternate proposal to generate same amount of revenue.'
Fruit Juices Council's representative Aatika Mir informed the committee that 20 per cent FED (on top of existing 18 per cent GST) imposed on the formal packaged juice industry since 2023, continues to stall the juice industry's growth. Decreasing sales' volumes of 45 per cent have also meant that in 2024-25, the government's revenue projections fell short of expectations.
The Fruit Juice Council, a body representing the formal juice industry, is asking for a reduction in the FED imposed on the juice industry. In line with local regulations, fruit drinks have minimum five per cent fruit content, nectars have 25 per cent—50 per cent fruit content, and pure juices have 100 per cent fruit content.
Fruit-based juices are a healthier option and are promoted as such by Food Authorities since they contain the goodness of fruits. Punjab and Sindh Food Authorities allow the sale of fruit-based juices in educational institutions while restricting sales of any other beverages.
Industry crash after 20 per cent FED imposition (in addition to 18 per cent GST), she pleaded.
Following a strong growth trajectory, the sales were projected to grow to more than Rs71billion in 2022-23. However, with the imposition of 20 per cent FED on juices (in addition to 18 per cent GST) since the Annual Budget 2023-24, industry sales have plunged by 45 per cent. Sales over the last year have fallen to around Rs42 billion.
Aatika stated that the decline in sales has led to the industry being unable to utilise its installed production capacity, with no new investments in the last three years. This shrinking business size has also negatively impacted fruit farmers and pulp processors since the fruit procurement volumes have dropped to below 2017 procurement volumes; only 20,233 tons of mangoes were purchased last year vs 31,000 tons purchased in 2017-18.
In addition, the imposition of 20 per cent FED (in addition to 18 per cent GST) is impacting affordability of the products produced by documented players. This means consumers are effectively paying around 42 per cent of the price as taxes on a pack of juice. This has resulted in a large proportion of consumers shifting to low-priced, low-quality and possibly unsafe alternatives offered by the undocumented sector, which is more than 25 per cent of the industry size.
The formal packaged juice industry also shows great potential for increasing exports.
Currently, packaged juices are exported to more than 30 countries across the world, with the potential to increase them. However, if the industry fails to get back on the growth trajectory, exports will also end up suffering. The Fruit Juice Council has requested the government to reduce the FED rate on the formal juice industry to 15 per cent.
Copyright Business Recorder, 2025
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