The dairy sector shrinks by 20% after GST hit

The government may have generated revenue of $ 44 billion after the imposition of 18% (GST) on the lactation of the lactic products on the latest budget. However, this move has also led to a 20% drop in production and sales of these products in Pakistan.

Some key offices of Pakistan Galactic Producers (PDA) told the media on Tuesday that since July 2024, the investment of millions of dollars has stopped in the dairy products due to increasing production costs.

In addition, about 500 milk collection points – created by dairy companies for the purchase of milk by farmers – have also closed and 20% of the workforce has lost employment.

PDA USMAN Zaheer, CEO Dr Shehzad Ameen, Noor Aftab and other officials said over 100 developed and developing countries, such as India, Bangladesh, Afghanistan, the US and the United Kingdom, do not impose taxes on packaged milk. Where taxes are collected, the percentage is usually about 5%.

Answering a question, they said that before 18% GST, the dairy sector has already contributed to 13.7 billion Rs in income and super tax revenue.

But in 2024, the sudden enforcement of GST promoted total tax revenue – income tax, super tax and GST – up to 44 billion Rs – a significant increase in surface, but one accompanied by a dangerous reduction in sales and production of dairy products.

They warned that the reduction in sales of dairy products would eventually reduce the revenue collection from the Federal Revenue Council (FBR) and affect employment. They added that if the GST had been reduced, even higher tax revenue could have been achieved.

The PDA admitted that there is a public perception that loose milk is safer than packaged milk, but this is not true. In Pakistan, 92% of the population uses loose milk, which poses serious health risks, while only 3% to 4% consume packaged milk.

The Union emphasized that taxation is a major challenge for this industry. Despite obstacles, the Pakistani dairy sector exports packaged milk worth $ 35 million during current use – twice the amount compared to the previous year.

According to the link, 45% of loose milk is not safe due to the highest risks of bacterial infection, while packaged milk meets international safety standards. The official said the RS1.3 trillion relaxed milk economy remains informal, which must be submitted under the tax net.

They also noted that Pakistan is currently exporting packaged milk to the Middle East, Africa, the US and Central Asia countries and efforts are underway to expand export to China.