The Fruit Juice Council (FJC), representing top juice brands in Pakistan, has urged the government to abolish the 20% Federal Excise Duty (FED) on the formal packaged juice industry. The imposition of this duty in fiscal year 2023-24, aimed at raising government revenues, has proven to be a failure, it said.
A 5% FED was imposed on the formal juice industry in FY2018-19, resulting in a decline in sales. However, after its removal, the industry experienced growth for three years, reaching an annual turnover of about Rs60 billion in 2022, with employment for around 10,000 people.
“The industry was projected to exceed Rs71 billion in sales in 2022-23, but the imposition of 20% FED (in addition to 18% GST) in the annual budget of 2023-24 caused a catastrophic decline, with sales plummeting by 41% to around Rs49 billion,” stated the council. This downturn has left the industry unable to utilise its production capacity, with no new investments made in the previous year and none planned for FY24-25.
Read The heavy FED toll on fruit-beverage industry
Punjab bears the brunt of this decline, as 80% of fruit is sourced from there, with 90% fruit pulping and 80% juice manufacturing taking place in the region. In 2022, the industry procured an estimated 100,000 tonnes of mangoes, kinnows, apples, peaches, and guava from local farmers for conversion into pulp. However, in the last two years, procurement volumes have declined by almost 50%, negatively impacting sales tax revenue and the overall allied industry, leading to unemployment and affecting farmers, according to the FJC.
Additionally, the imposition of 20% FED is affecting the affordability of products from documented players. This has led consumers to shift to low-priced, low-quality, and possibly unsafe alternatives offered by the undocumented sector.
The FJC suggests bringing the undocumented juice industry into the tax net instead of burdening the formal sector. They also highlight the potential for increasing exports, currently amounting to $15 million, to over $45 million in five years if the FED is abolished.
Published in The Express Tribune, May 24th, 2024.
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