The federal government is preparing a significant fiscal policy move by introducing Federal Excise Duty on packaged foods as part of the upcoming FY2025–26 budget, with the aim of generating nearly Rs.150 billion in additional revenue. According to senior officials in the Ministry of Finance, the proposal is in its final stages and reflects the government’s broader strategy to expand the tax base while limiting the impact on essential household items.
Under the plan, a range of widely consumed packaged food products—including cakes, sweets, cakes, sauces, dips, flavoured milk, breakfast cereals, syrups, ice cream, and potato chips—will be brought under both FED and additional sales tax. These items have traditionally faced minimal taxation despite their strong and consistent demand across urban markets.
Revenue Expectations Drive Federal Excise Duty on Packaged Foods
Officials familiar with the budget framework say the Federal Excise Duty on packaged foods is expected to deliver substantial contributions from high-volume segments of the food industry. Confectionery products such as cakes and traditional sweets are projected to generate more than Rs.47 billion through a combination of excise duty and sales tax. Biscuits, one of Pakistan’s largest packaged food markets, are expected to contribute close to Rs.49 billion, while snack foods like chips could add over Rs.22 billion to the national exchequer.
The estimates are based on current market sizes, consumption trends, and proposed duty rates, which are designed to strike a balance between revenue generation and business sustainability.
Protecting Essentials While Expanding the Tax Net
The government has emphasized that the Federal Excise Duty on packaged foods will not apply to essential food staples or basic dietary items. Officials argue that the proposed taxes are focused on discretionary and processed products that are more commonly consumed by middle- and upper-income groups, thereby minimizing the burden on low-income households.
By excluding necessities such as unprocessed grains, pulses, and basic dairy items, policymakers aim to avoid inflationary pressure on everyday food consumption while still broadening the indirect tax base.
Part of a Broader Fiscal Reform Agenda
According to senior Federal Board of Revenue officials, the Federal Excise Duty on packaged foods forms part of a wider fiscal reform agenda aimed at reducing reliance on traditional tax sources. With limited room to increase direct taxes and growing pressure to meet revenue targets, the government is increasingly turning to sectors with strong consumption resilience.
The move is also intended to support long-term economic stability by diversifying revenue streams, improving documentation in the food manufacturing sector, and aligning Pakistan’s tax structure more closely with international practices.
A Turning Point in Indirect Taxation Policy
If approved in the FY2025–26 budget, the Federal Excise Duty on packaged foods would represent a notable shift in Pakistan’s approach to indirect taxation. Historically, such duties were associated with luxury goods or harmful products, but the new framework reflects a changing view of processed and packaged foods as high-consumption categories with significant revenue potential.
As budget deliberations continue, industry stakeholders are closely watching how the proposed measures will be implemented and whether adjustments will be made to duty rates. What remains clear is that the Federal Excise Duty on packaged foods is poised to become a defining element of Pakistan’s next fiscal year, reshaping both consumer pricing and government revenue strategy.
