The Pakistan Dairy Association (PDA) has sounded the alarm over the viability of the formal dairy sector, calling the current 18% General Sales Tax (GST) on packaged milk “the highest in the world” and economically devastating.
At a media briefing attended by PDA Chairman Usman Zaheer, CEO Dr. Shehzad Amin, and Tetra Pak’s Director Corporate Affairs (Pakistan & MENA) Noor Aftab, the industry demanded urgent relief in the form of a reduction in GST from 18% to 5% in the federal budget.
The Finance Act 2024 ended zero-rating on milk, imposing 18% GST on both liquid and powdered forms. Since then, the sector has witnessed a 20% decline in volumes, 500 milk collection centers closed, and over 20% layoffs in formal employment.
“The ripple effect has forced 35% of our formal farmers to shift to the informal market,” said Dr. Amin. He warned that formal sector operations are becoming unviable, with plants running below 50% capacity and investments on hold.
The PDA estimates a loss of Rs. 1.3 billion annually in planned farm and processor investments. Meanwhile, the informal sector has gained Rs. 1,319 billion, capitalizing on the price gap caused by the tax.
The PDA argued that a 5% GST would revive formal milk volumes by 20% and raise government revenues by 22% year-on-year. “It’s a win-win reform,” said Noor Aftab.
PDA officials stress that without urgent policy correction, the formal sector will continue to shrink, risking long-term economic damage, loss of investor confidence, and erosion of regulatory control. The association reiterated that a reduced GST rate of 5% would not only rejuvenate industry growth but also support sustainable tax revenues for the government.
