Formalization of the dairy sector: “The government must learn from European, Indian models” – Business and finance

KARACHI: Strongly opposing the proposed levy of 18% GST on packaged milk, Pakistan’s dairy industry has asked the government to learn from the Indian example, saying the share of Indian packaged milk has increased from about 20% to 45% in about a decade , because milk is not taxed in India.

India is rapidly moving towards formalizing the dairy sector through favorable tax policies, industry sources have revealed.

Industry sources say India produces 230 billion liters of milk and a 25 percent increase in the share of packaged milk is almost equal to Pakistan’s 100 percent milk.

“We understand that taxation is an important policy tool to move the economy, health and nutrition in the desired direction, but taxes are mainly levied on non-essential food products,” industry sources said.

In a country like Pakistan, where malnutrition and chronic diseases are staggering and milk is the antidote to both and can improve the overall health of the nation, taxing packaged milk makes no sense and will further alienate people from safe and healthy packaged milk, they added.

Although the Pakistani food authorities and their scientists believe in this, especially the Punjab Food Authority which banned bulk milk in 2018 and the deadline for compliance was July 2022. As there was no conducive business policy for milk packaged milk, the ban never came into force though it was legal, it is banned in the territorial jurisdiction of Punjab, they said, adding that bringing packaged milk under the sales tax regime will favor bulk milk which is neither good for health nor for nutrition, nor for the sector and economy.

They said that in a country where 90 percent of milk is produced in bulk or in the informal sector and people are committed to moving towards a formal milk supply chain (packaged milk), putting packaged milk at a disadvantage compared to bulk milk would be antagonistic direction.

They said that even in countries where there is no bulk milk, milk (packaged milk) is either not taxed or is taxed at a reduced rate. The closest example where bulk milk also accounts for a significant portion is India, where 45 percent of the milk is packaged, compared to Pakistan, where only less than 10 percent is packaged.

Sharing tax details of developed countries, they stated that several developed European countries either have no tax or lower tax on packaged milk compared to other packaged foods. In most European countries, VAT on packaged milk is around 5-10 percent, while VAT on other foods in these countries is around 20-27 percent.