Islamabad, May 3, 2026 – Federal Minister for National Food Security and Research Rana Tanveer Hussain has emphasized the need for dairy sector tax reforms in Pakistan, calling for rationalized taxation and structural changes to improve affordability, ensure safe nutrition, and support farmers.
He made these remarks during a pre-budget 2026-27 consultation jointly organized by the Sustainable Development Policy Institute and the Pakistan Dairy Association, according to a press release issued on Sunday.
Focus on Tax Relief and Sector Growth
The minister noted that livestock contributes nearly 60 percent to Pakistan’s agriculture sector and holds strong potential for improving domestic nutrition and boosting exports. He acknowledged that existing taxation policies, particularly General Sales Tax (GST) on dairy products, have negatively impacted production and sectoral growth.
“Softening of the tax regime can help increase both production and revenue,” he said, adding that reducing GST on milk is feasible. He also revealed that pilot projects for pasteurization and the development of “safe milk cities” are under consideration to enhance quality and formalize the sector.
Concerns Over Informal Economy
In his welcome remarks, Dr Abid Qaiyum Suleri, Executive Director of SDPI, proposed multiple taxation scenarios and suggested placing processed milk in a third schedule. He warned that rural milk collection centres were shutting down, as pricing policies for processed milk were impacting loose milk markets.
Meanwhile, Usman Zaheer Ahmad, Chairman of the Pakistan Dairy Association, highlighted that nearly 40 percent of children in Pakistan suffer from stunting due to malnutrition, despite milk being widely consumed.
He noted that around 98 percent of the dairy sector remains informal, with limited quality control mechanisms. He further revealed that the imposition of 18 percent GST in 2024 led to a 27 percent decline in the formal dairy sector. He proposed reducing GST to 10 percent and integrating parts of the informal economy into the tax net, potentially generating up to Rs250 billion in revenue.
Nutrition and Public Health at Risk
Zainab Naeem, Head of Ecological Sustainability and Circular Economy Unit at SDPI, stressed that milk should be treated as a basic nutritional necessity rather than a luxury item. She called for policies to enhance affordability for low- and middle-income households.
Farrah Naz, Country Director of the Global Alliance for Improved Nutrition, said malnutrition costs Pakistan around 3 percent of its GDP annually, with over 40 percent of children under five affected by stunting. She advocated reducing GST on milk from 18 percent to 5 percent and strengthening formal dairy systems.
Policy and Investment Challenges
Naeem Hassan, Director of Business Taxation at the Ministry of Finance, described the recommendations presented by SDPI and the Pakistan Dairy Association as practical and implementable.
Additional Secretary at the Special Investment Facilitation Council, Sajid Mehmood Qazi, pointed out structural weaknesses in the tax system, noting that over-reliance on documented sectors discourages formal business growth.
Eman Fatima from the Prime Minister’s Office Board of Investment highlighted regulatory hurdles affecting new entrants in dairy farming, reiterating that high GST has slowed sectoral growth.
Food Safety and Long-Term Strategy
Dr Ihtesham Khan of the Food and Agriculture Organization raised concerns about public health, warning that loose milk often contains harmful micro-toxins due to poor feed quality and lack of testing.
Dr Sajid Amin Javed, Deputy Executive Director (Research) at SDPI, emphasized the need for a long-term, integrated policy framework combining fiscal, health, and rural development strategies. He called for incentivizing private sector investment and developing cooperative models to connect small farmers with markets.
Outlook
The consultation highlighted a broad consensus on the need for dairy sector tax reforms in Pakistan, with stakeholders urging the government to reduce GST, formalize the industry, and prioritize nutrition and food safety in the upcoming federal budget 2026-27.