Revised Federal Excise Act excludes mineral water and low-sugar hydration beverages from the 20% federal excise duty.

The Federal Board of Revenue (FBR) has officially withdrawn the Federal Excise Duty (FED) on mineral water and certain hydration beverages under the revised tax framework for fiscal year 2026-27, providing relief to manufacturers and consumers alike.

The change has been incorporated into the Federal Excise Act, 2005, as amended up to June 30, 2026. Previously, mineral water and hydration drinks were subject to a 20 percent FED, which increased retail prices and added to the tax burden on the beverage sector.

According to the updated schedule, sugary fruit juices, syrups, squashes, and similar beverages will continue to attract a 20 percent FED based on their retail price.

However, the government has introduced a significant exemption for mineral waters and specific hydration beverages formulated to support hydration and electrolyte replenishment.

The revised provisions clarify that mineral water, aerated water, and hydration or electrolyte drinks containing artificial sweeteners, sugar, or a combination of both are excluded from the excise duty, provided their sugar content does not exceed 5 grams per 100 milliliters.

This move effectively removes these products from the category of beverages subject to the 20 percent federal excise tax.

Industry observers believe the decision is aimed at encouraging healthier beverage options while reducing the tax burden on products designed for hydration and electrolyte balance.

The exemption may also help improve affordability for consumers, particularly during periods of high temperatures when demand for hydration products rises significantly.

The FBR’s latest amendment reflects the government’s broader effort to refine the taxation framework for beverages by distinguishing between sugary drinks and products specifically intended to support hydration.

Beverage manufacturers producing low-sugar hydration drinks are expected to benefit from the revised tax treatment, potentially leading to greater market growth and product innovation.

With the implementation of the updated Federal Excise Act, mineral water and qualifying hydration beverages will no longer be subject to the 20 percent FED, marking a notable change in Pakistan’s beverage taxation policy for FY2026-27.