Sales volume in the soft drink industry has experienced a substantial drop of up to 40 percent. This decline has been linked to the government’s decision to raise the Federal Excise Duty (FED) from 13 to 20 percent in a mini-budget implemented in February.
Reports have revealed industry insiders’ concerns regarding the negative impact of this tax increase on all companies within the industry’s supply chain. They warn that if the regulatory challenges persist, it could lead to the loss of thousands of jobs.
The potential consequences of these circumstances have prompted companies to consider the possibility of shutting down their factories. Such a scenario would not only exacerbate the financial situation for the government but also result in a loss of corporate and income revenue. It is estimated that the FED collection alone could suffer a setback of around Rs. 6 to 8 billion.
The carbonated beverage industry in this country faces one of the highest tax rates globally, with a 20 percent FED imposed on top of the average levy for the broader food and beverage industry.
Despite shouldering this heavy taxation burden, the industry has made significant investments, contributing an estimated $200 million to support the country’s foreign exchange reserves. These investments have proven particularly valuable during times of dollar shortages.