The federal government is finalizing a plan to impose Federal Excise Duty (FED) and additional sales tax on a range of high-consumption packaged food items in the 2025-26 budget to make additional Rs. 150 billion.
Items under review include cakes, sweets (mithai), biscuits, sauces, dips, flavoured milk, cereals, syrups, ice cream, and chips. These categories are currently untaxed or lightly taxed but are now a target for the government’s effort to boost fiscal revenues without burdening low-income households.
According to industry estimates:
The confectionery category (cakes and sweets) is projected to generate Rs. 47.4 billion (Rs. 40.2 billion in FED and Rs. 7.2 billion in sales tax).
The biscuit category, worth Rs. 206 billion, is expected to yield Rs. 48.6 billion (Rs. 41.1 billion in FED at 20% and Rs. 7.4 billion in sales tax).
The chips category, with a market size of Rs. 96 billion, could contribute Rs. 22.4 billion (Rs. 19 billion in FED and Rs. 3.4 billion in sales tax).
The tax structure will be calibrated to avoid affecting essential food products or lower-income groups.
The government feels this rebalancing will support business sustainability, encourage economic activity, and help build a more diversified and stable revenue base.
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