The upcoming implementation of an 18% General Sales Tax (GST) on packaged milk from July 1 is expected to significantly raise prices by Rs55 per litre across Pakistan. This tax adjustment is anticipated to impact consumers nationwide, particularly in urban areas, where grocery bills could see a notable increase, exacerbating inflationary pressures.
The GST imposition has sparked concerns among industry stakeholders, particularly regarding its impact on farmers. It is estimated that farmers could collectively face losses amounting to approximately Rs23 billion due to reduced profitability caused by the higher tax burden. This comes at a challenging time, following recent governmental policies affecting agricultural sectors, such as wheat imports during the caretaker administration.
Industry insiders have voiced apprehensions about the potential ramifications of the tax hike on Pakistan’s small but vital packaged milk market. They emphasize that the new tax regime could squeeze profit margins for manufacturers, impacting their ability to maintain sustainable purchase prices for milk from farmers.
In response to these developments, Prime Minister Shehbaz Sharif and his economic team, under the guidance of Finance Minister Muhammad Aurangzeb, are pursuing strategies to bolster government revenues. These efforts align with broader fiscal reforms aimed at expanding the tax base and reducing subsidies in the energy sector, aligning with conditions set by the International Monetary Fund (IMF) to secure much-needed financial support for Pakistan’s economy.
Overall, while the GST increase on packaged milk aims to enhance government revenue streams, its implementation raises concerns about its broader economic impact, particularly its potential effects on inflation and the agricultural sector.
