Government urged to cut GST on milk in pre-budget talks

The government has been urged to reduce the general sales tax on milk during pre-budget consultations, with officials and industry stakeholders linking high taxation to declining production and rising malnutrition.

The consultations, organised by the Sustainable Development Policy Institute and the Pakistan Dairy Association, also discussed proposals including pilot pasteurisation projects and development of ‘safe milk cities’ to improve quality and formalise the sector.

Minister for National Food Security and Research Rana Tanveer Hussain said reducing GST on milk was feasible and called for tax rationalisation and structural reforms to support the dairy sector.

He said livestock contributes nearly 60% to agriculture and holds potential for improving domestic nutrition and exports, adding that easing the tax regime could increase both production and revenue.

Pakistan Dairy Association Chairman Usman Zaheer Ahmad said the 18% GST imposed in 2024 led to a 27% decline in the formal dairy sector. He proposed reducing the tax to 10% and expanding the tax base by bringing part of the informal sector into documentation, which could generate up to Rs250 billion in revenue.

He said around 40% of children in Pakistan are affected by stunting despite milk being a widely consumed source of protein, while the sector remains 98% informal with limited quality controls.

Global Alliance for Improved Nutrition Country Director Farrah Naz said malnutrition costs Pakistan about 3% of GDP annually, with over 40% of children under five stunted. She proposed reducing GST on milk to 5% and expanding formal dairy systems and processing capacity.

SDPI Executive Director Dr Abid Qaiyum Suleri suggested placing processed milk under the third schedule and warned that rural collection centres are closing as pricing pressures shift demand towards loose milk markets.