Loose Milk Dominates Market While Legit Dairy Industry Suffers From Heavy Taxes, Claims Association

After the implementation of 18 percent GST on the dairy sector during the outgoing fiscal year 2024-25, tax revenue has increased more than three times to Rs. 44 billion in 2024-25 from Rs. 13.72 billion in the last fiscal year 2023-24. Chairman Pakistan Dairy Association Usman Zaheer told the media that if there had been a reduction in sales tax from 18 to 5 percent, then more tax revenue could have been collected from the dairy sector in the coming years. He said that daily industry sales decreased by 20 percent due to the implementation of 18 percent GST on dairy products, especially packaged milk and powdered milk. The packaged milk price has spiked to Rs. 350 per liter. This is worrying as 64 percent of packaged milk consumers earn under Rs. 50,000 per month. The PDA has also offered to cut milk prices by Rs. 50 per liter if the GST is reduced to 5 percent. The Dairy Association also rejected the perception in a country that loose milk is safer than packaged milk. Most consumers have been forced to revert to loose milk (92% of the market) despite 45 percent of it being declared unfit for consumption. Industry officials warned that this threatens public nutrition, especially among low-income groups 92 percent of the population in Pakistan consumes loose milk. 45 out of 92 percent of loose milk is unfit for consumption due to contamination risks, he added. On the other hand, he stated that only three to four percent of the population consumes packaged milk in accordance with international standards. He also said that the government should take the initiative to bring the Rs. 1,300 billion undocumented loose milk industry into a formal economy. The dairy industry has exported $35 million worth of packaged milk abroad in the current fiscal year, which is double the amount compared to the previous year. The association said that there is no tax on milk in more than 100 countries around the world. After the implementation of the tax on packaged milk in Pakistan, the dairy industry has shrunk, 500 units have been closed, and 20 percent of the workforce has lost their jobs. The country’s Rs. 1,300 billion economy of loose milk is undocumented and should be brought under the tax net. Representatives of the association said that packaged milk is being exported to the Middle East, America, and Central Asian countries, and now, efforts are being made to export it to China as well. To reverse the damage, the PDA has proposed reducing GST on packaged milk from 18 percent to 5 percent starting July 2025. The association argues this would boost volumes by 20 percent, increase government revenue by 22 percent annually, revive investments, and reduce reliance on unsafe, undocumented milk. The PDA has also offered to cut milk prices by Rs. 50 per liter for consumers if the GST is reduced, calling it a win-win for the government, industry, farmers, and the public.