The government is exploring various proposals to increase federal excise duty (FED) on several products, including a potential 100% hike on energy drinks, raising the rate from 20% to 40%.Â
According to media reports, this move is part of a broader strategy to boost revenue through indirect taxes in the upcoming budget.
In the outgoing fiscal year 2024-25, the Federal Board of Revenue (FBR) increased or imposed FED on various goods, generating approximately Rs 289 billion. Currently, the FBR is reviewing proposals to alter the FED on items such as juices and aerated water, although no final decision has been made.
The FBR is also considering adjustments to the FED structure on cigarettes, though there are no plans to reintroduce a third tier of cigarette taxation.
Earlier proposals to reduce taxes on beverages and tobacco to stimulate sector growth and increase transactions were abandoned. Instead, new proposals are being evaluated to assess the potential impact of higher excise duties on these sectors.
Additionally, the government raised the FED on international air travel and implemented a Rs 15 per kg excise duty on the supply of white crystalline sugar to manufacturing and processing entities. The FED on cement was also increased from Rs 3 per kg to Rs 4 per kg in the past year.
The Finance Act of 2024 introduced several new FED rates, including Rs 44,000 per kg on acetate tow, Rs 1,200 per kg on nicotine pouches, and a 5% ad valorem rate on lubricating oil. The government’s moves reflect a continued focus on generating additional revenue through indirect taxation.
