Senate standing committee finance and revenue has reduced the proposal to impose 10% additional FED on the juice industry to 5%, which is in addition to the 18% GST.
The juice industry coalition reached out to Prime Minister Muhammad Shehbaz Sharif, and Finance Minister Mohammad Ishaq Dar stressing that the FED will threaten the sector’s growth which has already seen a slump in the preceding few years.
According to industry estimates, the formal juices industry in Pakistan accounts for around Rs. 59 billion of annual revenue, whereas investment in the industry is estimated to be Rs. 40 billion.
The fruit-growing value chain of Pakistan is improving due to the central role of the fruit juices industry. The industry’s collaboration with the farming community prevents overripe fruit from being wasted.
Moreover, due to poor storage facilities, a lot of fruit is wasted in the peak season. The formal fruit industry helps assist with this problem. It also helps provide better processing and more efficient ways of fruit preservation to prevent wastage.
The industry facilitates the farmers by working with and purchasing fruits that are available in surplus quantities. Insiders say that another key problem is the fragmented nature of the sector that sees a mushroom growth of smaller, unregulated, and informal players entering the market seasonally.
Industry sources said:
Any additional taxation will encourage the business of non-tax players that will eventually result in loss of tax revenue due to a widening price gap.
The FED increases the consumer price of fruit juices encouraging them to opt for the products by the non-tax paying informal sector, which sees a mushroom growth, which can be of low quality and generate lower tax revenue.
In line with local regulations (such as Punjab Food Authority), fruit drinks have a minimum of 8% fruit content, nectars have 25-50% fruit content and pure juices have 100% fruit content. In fact, fruit juices are promoted as healthier options by Food Authorities across the country for consumption in schools and colleges.
Data shared by industry representatives show sales dropped from 2018 to 2019, when the government-imposed FED, which eventually resulted in a sharp decline in sales tax revenue that could have been potentially collected for the national exchequer.
However, a waiver of FED in the subsequent year and the following two years saw the industry regain momentum.
Via: Bussiness Recorder