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In a major people friendly move, government reverses increased taxes on dairy industry!

Keeping in mind the sustainable development of dairy in Pakistan, the dairy industry proposed a three-year program of consistent policies in the taxation regime, which will allow them to reinvest a major part of the incentive for the growth of the dairy sector.

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Chairman Pakistan Dairy Association, Mr. Ali Ahmed Khan, along with other members of PDA, met the finance minister, the commerce minister, and Chairman FBR on Friday, 18th June, to discuss the taxation issues of the dairy sector.

The finance minister committed to the dairy sector to remove sales tax anomalies from Finance Budget 2021-2022 and previous Budgets, and to reinstate the previous sales tax of 10% on value-added dairy products.

The minister also agreed to restore the UHT liquid milk segment, which is vital for nutrition among children and to make dairy products safe, to the zero-rated tax regime.

Both sides agreed that these steps would further the Government’s efforts to provide affordable nutrition to all Pakistanis, as well as support the farmers of Pakistan.

The finance minister asked Chairman FBR to ensure that the above changes are incorporated in the final budget to be passed by the Parliament.

“Pakistan Dairy Association will work closely with Prime Minister’s program to promote safe, healthy and nutritional dairy products, fight against stunting and malnutrition, improve the livelihood of farmers and provide safe milk to build a strong nation,” Chairman PDA, Mr. Ali Ahmed Khan said.

The minister asked FBR to work closely with the PDA team and develop a program to provide incentives to the dairy industry to make safe and nutritional products affordable.

Keeping in mind the sustainable development of dairy in Pakistan, the dairy industry proposed a three-year program of consistent policies in taxation regime, which will allow them to reinvest a major part of the incentive for the growth of the dairy sector, to develop farmer’s capabilities, and to increase the awareness of nutrition through safe milk among people of Pakistan.

Read More: Children ignored in 2021-22 budget as dairy products taxed heavily!!

Chairman PDA, Mr. Ali Ahmed Khan said, “Pakistan Dairy Association admires the vision of Prime Minister, Imran Khan to fight against malnutrition. The Prime Minister has consistently brought the issue into the limelight, proving his passion to build a strong nation through the development of strong human capital.

He added, ”We stand committed to partner with him in his mission, through providing safe and nutritious affordable dairy products for all Pakistanis. We would like to thank the Prime Minister for giving us the opportunity to do so through the initiatives he has agreed on in this Budget.”

Pakistan Dairy Association after the success of their demands being heard by the government expressed its gratitude to the finance minister and the commerce minister for understanding the challenges and supporting the dairy industry.

Background

It is worth mentioning that in the recent budget, despite the continuous requests by the dairy industry to make the dairy industry a zero-rating sector of the economy, the incumbent government had proposed the increase in taxes from 10 percent to 17 percent for the upcoming fiscal year 2021-22.

According to data, milk and other dairy products make up roughly 26 per cent of the kitchen budget, meaning that this price hike would impact the daily lives of consumers the most. Pakistan produces roughly 59.7 billion tons of milk annually, which has an informal market size of $34 billion.

Read More: The promise of nutrition broken in budget 2021-22 as dairy industry taxed

Thus, if the budget had passed the now reversed tax increase, it would have cost the dairy industry Rs5 billion.

The major concern, as GVS has repeatedly pointed out since 11th June, would be the impact on the consumers.

Firstly, the increased cost of production would be passed on to the consumers in the form of increased prices, however, the monetary losses on both demand and supply sides are not the only issues that this policy would have caused.

As conceded by the government that the adverse impact of this policy on the nutrition of the children would be stratospheric.

According to UNICEF, “Nearly 10 million Pakistani children suffer from stunting.” The UNICEF report on Pakistan’s nutrition says, “Only 38 per cent of children are exclusively breastfed for the first six months of life. As a result, more than half the children under five years of age are deficient in vitamin A, 40 per cent are deficient in both zinc and vitamin D, and nearly 62 per cent are anemic.”

The fortified products made especially for infants and their mothers are one of the best solutions for this and Pakistani children, especially those belonging to poor families need to eat right, UNICEF notes.

This reversal of increased taxes, and thus the consistency of policy would lead to the dairy industry growing and perhaps lead to greater accessibility of dairy products in the rural areas of Pakistan, via projects like Ehsaas Nashonuma and other NGO-led programs nationwide.

The fight against the stunted growth which affects an exorbitant 40 percent of children in Pakistan will arguably once again more effective, as the nutritious dairy products maintain their prices.

Read More: How is Nestle Pakistan Empowering Dairy Farmers?

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