Government revenue from juice industry to fall even more if FED rate not brought down from 20% to 15%

ISLAMABAD: The Fruit Juice Council, a body representing the formal juice industry, believes that the government should reduce the FED rate of 20% imposed on the juice industry to 15%, if it wants a higher revenue than the outgoing financial year.

The current 20% FED (on top of existing 18% GST) has stalled the juice industry’s growth and in FY2024-25 the government’s revenue projections fell short of its own expectations. This indicates that the juice industry has hit the Laffer Curve (where the taxation is so high that it results in sharp decline of sales, ultimately affecting government revenue).

In line with local regulations, fruit drinks have minimum 5% fruit content, nectars have 25%- 50% fruit content and pure juices have 100% fruit content. Fruit-based juices are a healthier option since they contain the goodness of fruits. Punjab and Sindh Food

Authorities allow the sale of fruit-based juices in educational institutions while restricting sales of any other beverages.

The decline in sales has led to the fruit procurement volumes dropping to below 2017
procurement volumes; only 20,233 tons of mangoes were purchased last year vs 31,000 tons purchased in 2017-18. This has also hurt the local fruit farmers and pulpers.

The government continues to say that it wants to encourage a documented economy but such policies are contrary to that aim. The 20% FED (in addition to 18% GST) is pushing the consumers to shift to low-priced, low-quality and possibly unsafe alternatives offered by the undocumented sector, which is growing day by day.

Moreover, the budget proposes that the reduction in price on account of chilling charges be lowered from 10% to no more than 5% of the price. This will increase the burden on the manufacturers even more. Instead of reducing the FED on fruit juices, the fruit juice and
beverage industry has been burdened further. FJC strongly urges the government to reverse this budget proposal.