Tag: GST on food

  • Packaged milk prices set to rise with 18% GST implementation from July 1

    Packaged milk prices set to rise with 18% GST implementation from July 1

    The prices of packaged milk and other essential items in Pakistan are set to rise following the government’s decision to impose an 18 per cent General Sales Tax (GST) in the Budget 2024-25, effective from July 1.

    The National Assembly (NA) approved the Federal Budget for the fiscal year 2024-25 today, which includes this new tax measure.

    Along with packaged milk, the 18 per cent GST will also be applied to herbal and homeopathic medicines, and food items such as branded flour, packaged rice, and lentils. The sales tax will additionally extend to charitable and welfare hospitals.

    Despite the Senate Standing Committee on Finance rejecting the proposal, the government has moved forward with the decision. This move is anticipated to increase the cost of living, particularly affecting low-income families who rely on these essential goods.

    The approval of the Federal Budget comes amidst rising concerns over inflation. Reports indicate that the International Monetary Fund (IMF) has urged Pakistan to further reduce sales tax exemptions, which is likely to contribute to the inflationary trend in the coming fiscal year. Consequently, the prices of milk, tea, sugar, rice, and flour are expected to rise.

    The National Assembly passed the Finance Bill, 2024, following a clause-by-clause reading and amendments process.

    All amendments proposed by opposition members were rejected. Minister for Finance and Revenue Muhammad Aurangzeb presented the motion for the consideration of the Finance Bill, which was passed by a majority vote.

    The budget has a total outlay of Rs18,870 billion and aims to address various economic challenges facing the country.

    However, the imposition of the 18 per cent GST on essential items is likely to put additional financial pressure on the population, raising concerns about the affordability of basic necessities for many Pakistanis.

  • FBR imposes 18% GST on packaged food items to boost revenue

    FBR imposes 18% GST on packaged food items to boost revenue

    The Federal Board of Revenue (FBR) has announced the imposition of an 18 per cent General Sales Tax (GST) on packaged food items, including formula milk.

    The announcement was made during a meeting of the Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla. Amjad Zubair, Chairman of the FBR, informed the committee that the GST will be applied to all packaged items sold at departmental stores and large retail outlets, but will not affect unpackaged food items sold at general stores.

    In response to concerns raised during the meeting, the committee recommended a reduction in the GST rate on formula milk due to its critical importance for infant health. Chairman Zubair acknowledged the significant tax revenue generated from formula milk and expressed the government’s willingness to consider a reduction in tax rates if companies agree to lower their prices.

    The committee also addressed the issue of unregistered outlets selling formula milk, recommending that these outlets be blacklisted to ensure compliance with tax regulations.

    It is notable that this move aligns with a demand from the International Monetary Fund (IMF). During recent talks with Pakistani authorities for a new loan agreement, the IMF recommended increasing the general sales tax to 18 per cent.

    The IMF mission observed that Pakistan’s current sales tax collection system faces challenges, with the federal government collecting tax on commodities and the provinces on services. The IMF suggested that sales tax collection should be centralized under the federal government and that GST exemptions be eliminated.

    This development is part of broader efforts to streamline Pakistan’s tax system and enhance revenue collection as the country seeks financial assistance from international lenders.