Sales plunge 20% as Pakistan’s dairy sector reels from 18% GST

Pakistan’s dairy industry is facing major setbacks in the 2024-25 fiscal year, as domestic sales plunge by 20% following the government’s decision to impose an 18% General Sales Tax (GST) on dairy products.

The Pakistan Dairy Association (PDA) said on Tuesday that the move has led to sharp drops in consumption and production, even though tax collection from the sector has jumped significantly.

Tax revenue from dairy sales surged to PKR 44 billion in FY 2024-25, up from PKR 13.72 billion the previous year. But the PDA said this increase has come at a steep cost.

“The 18 percent GST has triggered a 20 percent decline in sales, particularly affecting packaged and powdered milk,” PDA Chairman Usman Zaheer told reporters. “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.”

Zaheer said over 500 dairy processing units have shut down since the tax was introduced, and the industry has seen a 20% reduction in its workforce, resulting in major job losses.

He also called on the government to bring the PKR 1,300 billion loose milk sector under regulation. The PDA estimates that 92% of Pakistan’s population consumes loose milk, but nearly half of it is unfit for human consumption.

“Forty-five percent of loose milk is unfit due to contamination risks,” the PDA said, countering the belief that unpackaged milk is safer. In contrast, only 3% to 4% of the population consumes packaged milk, which the association says meets international safety and hygiene standards.

The PDA urged authorities to treat milk as a basic necessity, pointing out that over 100 countries do not tax milk and classify it as a zero-rated essential item.

“Milk is a basic necessity, and we need policies that support both the health of the population and the sustainability of the dairy sector,” Zaheer said.

Despite domestic setbacks, dairy exports have risen to $35 million in FY 2024-25. Pakistani packaged milk is now being exported to the Middle East, the United States, and Central Asia. Efforts are also under way to enter the Chinese market, the PDA said.