A consensus emerged from a high-level policy dialogue in Islamabad today, with leading experts, industry stakeholders, and government representatives strongly recommending that the General Sales Tax (GST) on packaged milk be reverted from the current 18% back to 5%. The call was made to provide a much-needed boost to Pakistan’s vital dairy sector, which plays a crucial role in the rural economy and the national nutrition chain.
The dialogue, titled “Enabling Dairy Sector Transformation through Smart Taxation,” was organized by the Sustainable Development Policy Institute (SDPI) as part of its ongoing pre-budget consultation series for the fiscal year 2025–26.
Informal Market Dominance and Health Risks
Dr. Abid Qaiyum Suleri, Executive Director of SDPI, highlighted that over 90% of Pakistan’s dairy operations remain largely informal, undocumented, and untaxed. He emphasized that the existing high GST on dairy products, particularly packaged milk, acts as a significant deterrent to formalization, effectively penalizing businesses that adhere to health and safety standards. “Reducing GST to 5% will not only strengthen documentation but also enhance food security and public health,” Dr. Suleri noted, drawing a direct link between tax policy and national well-being.
Dr. Umar Farooq, a Research Associate at SDPI, presented alarming data underscoring the detrimental impact of the current tax rate. He revealed that the 18% GST has led to a 20% decline in packaged milk sales and resulted in the closure of more than 500 formal milk processing units. “This shift has pushed approximately Rs1.3 trillion into the informal market, which is largely unregulated and often unsafe,” he warned. Dr. Farooq further pointed out that globally, the average GST on milk stands at a mere 6%, making Pakistan’s rate unusually high and detrimental to its formal dairy sector.
Industry Leaders Echo Concerns
Industry leaders present at the dialogue vociferously voiced their concerns. Muhammad Nasir of FrieslandCampina Engro Pakistan underscored dairy’s critical role as a social and nutritional safety net for the country. “Increasing the GST on dairy products is not just bad economics—it threatens the health of future generations,” he asserted. With Pakistan already facing a child stunting rate of nearly 40%, experts argued that overtaxing safe, packaged milk could severely worsen nutritional outcomes and exacerbate public health crises.
Aatekah Mir from Nestlé Pakistan added that the high tax has actively discouraged and frozen much-needed investment in dairy infrastructure, including vital cold chains and pasteurization facilities. She observed that there is broad political agreement against the current high tax, calling for its immediate revision in the upcoming budget. Similarly, Dr. Shehzad Amin, CEO of the Pakistan Dairy Association, labeled the 18% GST as “globally unjustified” and a significant barrier to public access to safe milk. “No other country taxes milk this high. Safe milk is a human right, not a luxury,” he passionately stated.
Experts further emphasized that nearly 96% of milk from the informal sector is known to be adulterated, posing severe health risks to consumers. They collectively stressed that reducing GST to 5% would provide a strong incentive for formal operations to expand, ensuring a safer and healthier milk supply for the population, while simultaneously contributing positively to national health and broader economic goals.
In a unified conclusion, all stakeholders present at the dialogue unanimously called for a reformed GST structure—specifically, a reduction to 5% for dairy products. They believe this change is critical to promote the sector’s growth, significantly improve nutritional outcomes across the country, and effectively bring a larger portion of informal milk production into the regulated and taxed economy.
