ISLAMABAD: Consumers across Pakistan could soon face higher prices for ghee and cooking oil after the federal government introduced a new sales tax collection mechanism in the Budget 2026-27, industry representatives have warned.
According to the Pakistan Vanaspati Manufacturers Association (PVMA), the latest tax changes may increase retail prices of ghee and cooking oil by Rs. 10 to Rs. 15 per kilogram, adding to the burden on already inflation-hit consumers.
Budget Expands Third Schedule Tax Regime
Chairman PVMA Sheikh Umer Rehan said the government has expanded the scope of the Third Schedule of the Sales Tax Act, changing the way sales tax is collected on ghee and cooking oil products.
Under the revised mechanism, sales tax will be charged on the Maximum Retail Price (MRP) printed on product packaging instead of the lower ex-factory price used previously.
Industry stakeholders argue that the shift will significantly increase the tax liability of manufacturers, with the additional cost ultimately being passed on to consumers through higher retail prices.
Consumers Likely to Bear Additional Cost
Rehan stated that the edible oil and ghee sector had requested tax relief in the federal budget to help reduce food inflation and ease pressure on households.
However, he said the new fiscal measures have moved in the opposite direction by increasing the industry’s tax burden at a time when consumers are already struggling with rising living costs.
“The additional tax impact is expected to translate into an increase of approximately Rs. 10 to Rs. 15 per kilogram in retail prices,” industry representatives warned.
How the Third Schedule Works
The Third Schedule mechanism requires manufacturers to calculate and pay sales tax based on the retail price displayed on products rather than the ex-factory price at which goods leave manufacturing facilities.
As a result, the taxable value becomes higher, leading to increased sales tax collection by the government and potentially higher market prices for consumers.
Tax experts say the move is aimed at improving tax collection and reducing under-invoicing, but it could also contribute to food inflation if manufacturers pass on the additional cost to buyers.
Industry Seeks Government Review
The edible oil and ghee industry has urged the government to review the decision, arguing that higher taxes on essential food items could further strain household budgets and reduce consumer purchasing power.
The development comes as businesses across multiple sectors continue to assess the impact of Budget 2026-27 measures, with several industries expressing concerns over new taxation policies and compliance requirements.
If implemented as anticipated, consumers may start seeing the impact of the revised tax regime in retail prices of ghee and cooking oil in the coming weeks.
