ISLAMABAD: The Pakistan Dairy Association (PDA) has warned that the imposition of 18% GST on the dairy sector has damaged the formal industry while boosting unsafe loose milk consumption.
Tax revenue from dairy surged from Rs. 13.72 billion in FY 2023-24 to Rs. 44 billion in FY 2024-25 after the tax hike.
However, industry sales dropped by 20%, and 500 processing units shut down, causing significant job losses.
Tax Burden Driving Consumers Away
Chairman of PDA, Usman Zaheer, told the media that the 18% GST has priced packaged milk out of reach for many.
With prices reaching Rs. 350 per liter, 64% of consumers earning below Rs. 50,000 a month are turning back to loose milk.
The association has offered to reduce packaged milk prices by Rs. 50 per liter if the GST is reduced to 5%.
PDA argues that a lower tax rate could increase dairy volumes by 20%, revive investments, and raise tax revenues by 22%.
Pakistan’s packaged milk sector has also seen export success, doubling to $35 million this year, including shipments to the Middle East and Central Asia.
The association is now eyeing exports to China.
It further highlighted that over 100 countries do not impose tax on milk, suggesting Pakistan should adopt a similar policy.
Health Risks and Informal Market Concerns
Despite safety risks, 92% of milk consumed in Pakistan is loose.
An alarming 45% of this milk is deemed unfit for human use.
Only 3–4% of the population consumes milk that meets international packaging and safety standards.
PDA is urging the government to formalize the Rs. 1,300 billion undocumented loose milk market.
They claim this would ensure safer milk for the public, increase government tax revenues, and bring balance to the struggling formal dairy sector.
