FBR mulls tax cuts on tobacco, beverages, and real estate to spur economic activity

The Federal Board of Revenue (FBR) has proposed reductions in Federal Excise Duty (FED) on tobacco and beverages and lower withholding tax rates on real estate transactions to boost sales volumes and increase revenue collection. 

According to a news report, the proposed measures, which are expected to generate an additional Rs90-100 billion during the April-June quarter of the fiscal year 2024-25, were discussed with the International Monetary Fund (IMF) mission during ongoing negotiations.

The report citing FBR officials, said that the objective behind reducing tax rates in these three sectors is to stimulate economic activity. A decrease in FED on tobacco and beverages is expected to drive higher sales, while easing tax burdens on real estate transactions could increase the frequency of buying and selling properties, thereby contributing to revenue growth. 

However, no final decision has been reached yet, as the proposal requires approval from both the government and the IMF.

The FBR has been facing a Rs600 billion revenue shortfall, with collection figures falling below targets in recent months. With limited room for new taxation measures, authorities are exploring policy adjustments that encourage compliance and enhance collection without burdening existing taxpayers further. 

In a separate development, the government is reviewing the 18% General Sales Tax (GST) imposed on packaged milk, following strong opposition from the Pakistan Dairy Association (PDA). The issue was raised during a meeting between PDA representatives and Minister for National Food Security and Research Rana Tanveer Hussain. 

Dairy sector stakeholders have warned that the GST is making packaged milk unaffordable for consumers and discouraging investment in dairy farming and processing.

During the meeting, Hussain acknowledged the challenges faced by the dairy industry and stressed the need for policy reforms to modernize the sector. He noted that Pakistan is among the world’s leading milk producers, with an annual output exceeding 70 million tons, but strategic investments are required to unlock its full potential. 

He emphasized that aligning the dairy industry with international standards would improve productivity, enhance product quality, and increase the sector’s contribution to food security.

The PDA delegation urged the government to reconsider the GST, arguing that it is not only affecting affordability for consumers but also slowing down investment in modern dairy farming practices. They highlighted that dairy farmers are struggling with rising costs of production, including feed and energy expenses, which are compounded by the tax burden.

Hussain assured the delegation that the Ministry of National Food Security and Research would consult with relevant stakeholders, including the Finance Ministry, to explore potential relief measures. He reaffirmed the government’s commitment to supporting dairy farmers and ensuring a stable supply of high-quality dairy products.