Islamabad, May 23, 2025: In a strategic move to enhance fiscal revenues, Pakistan’s federal government is gearing up to introduce Federal Excise Duty on packaged food items in the upcoming 2025-26 budget. This initiative aims to generate an additional Rs. 150 billion by targeting popular high-consumption products that have so far escaped significant taxation.
The proposed taxation will focus on a wide array of packaged foods including cakes, traditional sweets (mithai), biscuits, sauces, flavored milk, cereals, syrups, ice cream, and chips.
These categories, previously either untaxed or lightly taxed, now fall under the government’s revenue expansion plan, carefully designed to avoid placing financial strain on low-income households.
Industry insiders project robust revenue inflows from these measures:
- The confectionery sector, encompassing cakes and sweets, is expected to contribute around Rs. 47.4 billion, with Rs. 40.2 billion from Federal Excise Duty and Rs. 7.2 billion from sales tax.
- The sizable biscuit market, valued at Rs. 206 billion, could yield Rs. 48.6 billion, primarily through a 20% FED that accounts for Rs. 41.1 billion and an additional Rs. 7.4 billion in sales tax.
- The ever-popular chips category, worth Rs. 96 billion, is anticipated to generate Rs. 22.4 billion in revenue (Rs. 19 billion from FED and Rs. 3.4 billion from sales tax).
Tax experts emphasize that this calibrated approach aims to protect essential food items and shield vulnerable consumer groups from undue financial pressure.
The government’s focus is to create a sustainable fiscal environment that encourages business growth and economic diversification.
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Comparatively, this tax reform mirrors global trends where excise duties on non-essential, packaged consumables help stabilize revenue streams without hampering economic growth.
Analysts suggest that Pakistan’s move could improve market discipline among manufacturers while fostering a more equitable tax system.
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As the budget announcement approaches, businesses and consumers alike are keenly observing how this policy will unfold. Will it strike the right balance between revenue generation and consumer protection? Only time will tell.
