KARACHI: After a Rs20 per litre hike in the price of loose milk, the cost of locally produced infant formula and fortified nutrition milk is also expected to rise following the imposition of 18 per cent general sales tax (GST).
In his budget speech on Wednesday, Finance Minister Muhammad Aurangzeb proposed the commodity to be removed from the list of zero-rated products which are not taxed.
Meanwhile, industry representatives have expressed apprehension that the standard 18pc tax status will have severe implications for businesses and cause significant damage.
Waqar Ahmed Sheikh, an industry representative, said locally produced infant formula and children’s fortified nutrition milk have different prices.
He estimated that the price of a one-litre container of tetra-pack milk would rise from Rs 300 to Rs 350-360 after the imposition of GST.
Impact of ‘25pc’ taxes
Mr Sheikh explained that 4pc sales tax is charged on the products, while 2.5pc new advance income tax would be applicable on retailers not registered with the Federal Board of Revenue (FBR).
Since 75pc of the traders were not-registered and unwilling to comply with the FBR guidelines, customers will have to bear the cost of this “sudden” tax of approximately 25pc.
This would greatly impact businesses’ annual turnover and profitability, leading to a scale-down of operations, he added.
Local manufacturers have requested the federal government to phase out the GST imposition in three stages, starting from 5pc in the first year, followed by 10pc in the second year and the remaining 3pc in the third year.
Mr Sheikh added that Pakistan is facing a crisis of malnutrition, and its under-five mortality rate was 137 for every 1,000 births. “This is very high by international standards.”
According to the National Nutrition Survey, 40pc of children in Pakistan are underweight and over half of the children are affected by stunting, he claimed.
Mr Sheikh added that he also highlighted the issue in the meeting of the Senate Standing Committee on Finance and Revenue, which is currently deliberating on budget proposals.
Senator Saleem Mandviwalla, the committee chairman, suggested the FBR head, who was also present in the meeting, to review the imposition of 18pc GST.
He said the GST on locally produced infant nutrition and children-fortified milk should be implemented gradually.
This phased approach to the GST will balance the impact on industry and consumers while generating revenue for the government.
He emphasised the importance of low GST for supporting child nutrition milk to address the issue of malnutrition.
Published in Dawn, June 16th, 2024
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