Stakeholders urge 5% cut in FED to revive packaged juice sector

LAHORE: The Fruit Juice Council (FJC) has urged the government to reduce the federal excise duty (FED) on the formal packaged juice industry to 15 per cent, arguing that such a move would help the sector recover from its current slump while also boosting government revenue.

An FJC representative said, “At an even lower FED rate of 10 per cent, the industry’s growth would accelerate further. However, considering the country’s economic situation, we propose a 5.0 per cent reduction to ensure a balanced, win-win outcome for both the industry and the government.”

The imposition of a 20 per cent FED, in addition to the existing 18 per cent GST, since 2023 has significantly hampered growth in the formal juice sector. Sales volumes have declined by 45 per cent, leading to a shortfall in government revenue projections for FY2024-25.

The FJC, representing the formal juice sector, is advocating for the proposed 5.0 per cent cut in FED in the upcoming Annual Budget 2025-26. The council contends this would create a mutually beneficial scenario for the industry and the government alike.

Stakeholders stressed the importance of promoting healthier beverage options. Fruit-based juices, approved by food authorities, offer a nutritious alternative due to their fruit content. Local regulations require a minimum of 5.0 per cent fruit content in fruit drinks, 25-50 per cent in nectars, and 100 per cent in pure juices.

According to stakeholders, the introduction of the 20 per cent FED has seen industry sales drop from a projected Rs71 billion in 2022-23 to approximately Rs42 billion last year. The downturn has also adversely affected fruit farmers and pulp processors, with mango procurement volumes falling to 20,233 tonnes in 2024 from 31,000 tonnes in 2017-18.

The high taxation has made products from the formal sector less affordable, with around 42 per cent of the retail price attributed to taxes. This has led many consumers to turn to cheaper, lower-quality, and potentially unsafe products from the undocumented sector, which now holds more than 25 per cent of the market share.

The formal packaged juice industry currently exports to over 30 countries and holds substantial potential for expansion. However, stakeholders warn that without a recovery in domestic demand, export growth could also stagnate.

Minister for Commerce Jam Kamal and Coordinator to the Prime Minister Rana Ihsan have acknowledged the detrimental impact of high taxation on the industry. They emphasised the importance of a strong domestic foundation to support export growth and raised concerns about the expanding undocumented sector, which continues to undermine the formal industry.