ISLAMABAD: The upcoming federal budget for the fiscal year 2025-26 is expected to bring significant price increases on several food items, including popular beverages and processed edibles, with price hikes potentially reaching as high as 50%.
Sources within the Federal Board of Revenue (FBR) indicate that a substantial rise in federal excise duty (FED) is being considered for sweetened beverages such as soft drinks, juices, and carbonated soda water. The proposed increase would see the current FED rate of 20% more than double to 40%, marking a drastic change aimed at reducing the consumption of sugar-rich drinks. Additionally, products containing artificial sweeteners or flavouring agents, such as syrups, squashes, and fruit juice-based carbonated drinks, could fall under the new tax regulations.
The FBR is also contemplating a 20% tax on various industrially produced dairy-based products, including milk-based items that are processed and packaged for commercial sale. Meat products, particularly sausages and dried, salted, or smoked meats, are also set to experience price hikes due to revisions in tax slabs, making these items more expensive for consumers.
Processed foods, including chewing gum, chocolates, candies, caramels, pastries, biscuits, cornflakes, and other cereals, are expected to see tax increases as well. This will likely raise the cost of several bakery products, further impacting households.
Furthermore, the proposed budget may include higher taxes on fat-based food items, including ice cream, sweetened yogurt, frozen treats, and other dairy or vegetable fat-based products. These tax hikes, reportedly set to be implemented gradually, are expected to culminate in a 50% increase over the next three years.
The proposed tax revisions come in the wake of pressure from the International Monetary Fund (IMF) for Pakistan to broaden its tax base and reduce its fiscal deficit as part of securing further tranches of funding under the ongoing loan programme. While the government maintains that the price hikes are part of efforts to promote public health by rationalizing consumption, stakeholders within the food and beverage industry express concerns about the potential negative impact on production, job losses, and increased inflationary pressure on households.
The final decision regarding these proposed changes will be made public when the federal budget for 2025-26 is presented in June.
