Karachi, May 23, 2025 – Foreign investors operating in Pakistan have called on the government to provide tax relief for the beverage industry in the upcoming federal budget for fiscal year 2025-26.
Represented by the Overseas Investors Chamber of Commerce and Industry (OICCI), these investors have submitted comprehensive proposals, urging rationalization of the Federal Excise Duty (FED) structure currently burdening the sector.
In their submission, foreign investors specifically highlighted the impact of the increased FED on aerated beverages, as detailed in Serial Nos. 4, 5, and 6 of the First Schedule of the Federal Excise Act, 2005. The tax rate on these beverages was raised from 13% to 20% via the Finance (Supplementary) Act, 2023—a surge of more than 50%. According to the investors, this sudden and steep hike has severely affected the beverage industry, leading to a 30% volume decline in 2023 and an additional 12% drop in 2024, pushing the sector back to 2018 production levels.
The foreign investors argue that such excessive taxation discourages investment and stifles industrial growth, ultimately reducing government revenue over time. Despite navigating multiple challenges since 2020—including the COVID-19 pandemic, import restrictions, and rising inflation—investors have continued to support the beverage sector. However, the abrupt tax increases risk derailing this progress.
To stabilize the industry, the foreign investors have proposed a reduction of FED on aerated beverages from 20% to 18%. They believe this adjustment will curb further market shrinkage, protect jobs, and enable businesses to reinvest in production capacity—ensuring long-term government revenue and economic recovery.
Additionally, concerns have been raised about the drastic increase in FED on fruit juices (Serial No. 59), which rose from 0% to 10% in early 2023 and was later doubled to 20%. This has led to a 40% decline in juice sales and a 50% reduction in fruit pulp procurement, severely impacting local farmers. The foreign investors argue that the documented beverage sector, which adheres to strict tax compliance, is suffering disproportionately while the undocumented market flourishes.
To address this, they have proposed reducing the FED on juices to 15%. The foreign investors believe this will ease inflationary pressures, sustain agricultural livelihoods, encourage reinvestment, and boost exports—currently valued at $15 million annually—enhancing Pakistan’s foreign exchange earnings.
By revising tax policies, foreign investors assert that the beverage industry can rebound, contributing more effectively to economic resilience and national development.