A report compiled by an independent think-tank has urged the Government of Pakistan to abolish the 20% Federal Excise Duty (FED) on the packaged fruit juice industry, arguing it has pushed a once-expanding, revenue generating sector into an economic “disaster,” impacting the industry, farmers and government revenues.
Issued ahead of the upcoming federal budget for FY2026-27, the report compiled by the PRIME Institute says the current tax framework—imposed in FY2023-24—has severely damaged the formal juice industry, as it collects 20% in FED in addition to 18% general sales tax. The combined burden has pushed taxation on packaged juice products to nearly 38% of the retail price, driving down sales and investment.
The report notes industry sales were projected to exceed Rs. 72 billion in FY2023 but saw a decline of nearly 45% to around Rs. 42 billion following the imposition of the excise duty. It said sales volumes had declined to levels last recorded in 2017, effectively wiping out almost a decade of industrial expansion in a single fiscal year.
According to the institute, there have been no major new investments in the sector since the FED was introduced in 2023. It describes the situation as a textbook example of the “Laffer Curve,” under which excessively high tax rates ultimately reduce government revenues by shrinking the taxable base.
The report notes revenue projections for FY2024-25 also failed to meet expectations, with the higher tax burden reducing consumer demand and compressing industry sales volumes. “The fiscal math does not work when an industry is taxed into decline,” it said.
The loss of sales, read the report, also impacts the agriculture sector, as the packaged juice industry plays a central role in the country’s fruit supply chain. Industry procurement of mangoes declined to 20,223 tons during FY2023-24 from 31,000 tons in FY2017-18, affecting fruit growers, pulp processors and rural incomes, it said. This, in turn, has contributed to higher post-harvest losses and food wastage, which remain major challenges for the agriculture economy.
PRIME also argues that the higher FED has accelerated the growth of undocumented and informal beverage manufacturers producing unregulated products outside the tax net. Industry representatives cited in the report said government policies were effectively penalizing compliant companies adhering to food safety and tax regulations, while enabling the rapid expansion of undocumented competitors.
The report notes that the abolishment of a previous 5% FED on the sector had seen sales rise to around Rs. 60 billion, creating nearly 10,000 jobs and reducing value-chain losses. It has urged the government to abolish entirely the 20% FED in the upcoming budget rather than opting for partial reductions. It has argued that the existing 18% sales tax already ensures adequate revenue contribution from the sector, while the additional FED functions as a punitive levy rather than a necessary fiscal instrument.
The think tank also called for fruit juices to be legally separated from carbonated soft drinks under Pakistan’s taxation rules, arguing both product categories are fundamentally different and should not be taxed identically.
The report emphasizes that long-term revenue recovery lies in broadening the tax base and integrating undocumented businesses into the formal economy instead of increasing pressure on compliant industries.