Pakistan’s long-running struggle to document its retail economy is now spilling into a more immediate concern for households: the price consumers actually pay at the shelf.
A recent article published in Dawn, titled “Addressing Markup Consumer Prices,” argues that Pakistan’s sales tax regime, despite being in place for more than two decades, continues to suffer from major gaps across the supply chain. The article highlights that wholesalers and retailers, who were originally expected to be brought into the tax net, remain either partially documented or completely outside it.
That failure is no longer just a revenue problem for the state, it has become a consumer protection issue.
The article further notes that the government’s attempt to penalise unregistered retailers through additional taxes has not delivered the desired results. A four per cent further tax and 2.5 per cent advance income tax, imposed on top of 18 per cent sales tax, may appear punitive on paper. In practice, however, manufacturers often absorb these charges rather than risk losing shelf space in an informal retail market.
This creates a structural distortion. The retailer remains largely undocumented. The manufacturer bears additional costs. The government continues to face revenue leakage. And the consumer, at the end of the chain, is left with inconsistent retail prices and limited transparency.
The reform currently under discussion involves expanding the Third Schedule of the Sales Tax Act to include more everyday consumer goods such as cooking oil, milk, dairy products, baby formula, and flour. Under this mechanism, sales tax is collected upfront at the manufacturer or importer level, based on the printed retail price. With the price clearly displayed on packaging, the tax base becomes visible and the scope for arbitrary retail markups is reduced.
According to the article, tax experts believe that bringing more products under the Third Schedule could ensure that sales tax on key grocery and everyday consumer items—including cooking oil, dairy, flour, baby food, frozen foods, and other packaged goods—is paid at the production stage and transparently reflected on every pack.
For consumers, this is the key issue. A printed price is not merely a technical tax detail, it is a safeguard.
In a market where household budgets are already under pressure, consumers need clarity on whether they are paying the declared price or an inflated retail markup. This is especially relevant for essential grocery categories such as dairy products, infant formula, cooking oil, flour, noodles, and frozen foods, where frequent price fluctuations directly impact family spending.
The article also notes that several products, including bottled water, biscuits, coffee, ice cream, chocolates, juices, beverages, packaged tea, spices, soaps, and shampoos—are already covered under this regime. The argument now is that other high-consumption categories should not remain outside a framework that enhances revenue visibility and price transparency.
There is also a regulatory dimension to consider. Weak enforcement of recommended price lists has created room for overcharging and inconsistent pricing. Provincial food departments and price control authorities have previously raised concerns about such practices, particularly where retail prices are printed on some products but not others.
The debate, therefore, should not be limited to whether the government can collect more tax. The broader question is whether consumers should continue purchasing essential packaged goods in a market where the final price often remains unclear until checkout.
Expanding the Third Schedule may not fully document the retail economy, but it offers a practical enforcement tool in a system where informality remains deeply entrenched. For the FBR, it simplifies tax verification. For manufacturers, it eliminates a cost they were never meant to bear. And for consumers, it ensures that the price is where it should be, clearly visible on the pack.
At a time when inflation has made every grocery decision more sensitive, a printed price may be one of the simplest ways to restore fairness at the retail shelf.