The Federal Board of Revenue (FBR) has announced an 18% sales tax on staple food items, including flour, lentils, sugar, rice, and spices.
FBR Chairman Amjad Zubair Tawana disclosed this decision during a Senate Standing Committee on Finance session, which was chaired by the committee’s chairman and attended by various stakeholders, including industry representative Sheikh Waqar.
Chairman Tawana further explained that the new tax measure is part of broader fiscal policies aimed at increasing government revenues without burdening the lower-income segments of the population. For instance, the 18% GST introduced on locally processed milk does not affect formula milk typically purchased by low-income families. To support these families further, a reduction in the existing 8% GST on formula milk has been proposed.
The chairman also highlighted challenges in the dairy sector, noting significant price increases by dairy companies over the last two years without a proportional increase in their tax contributions. He criticized the reluctance of distributors, particularly those of multinational corporations, to enter the tax net despite high sales volumes, especially of imported milk sold at double the price of local milk.
The FBR’s move aims to enhance tax revenues and encourage fair pricing practices within the industry. If the companies respond by reducing their prices commensurately, consumers could benefit from lower retail prices equivalent to the tax adjustment.
