The formal Juice industry is playing a vital role in providing healthy choices of fruit drinks and juices to the consumers. The industry has an annual turnover of above PKR 59 billion with an estimated investment of PKR 40 billion and employs over 5,000 employees in the value chain.
In line with local regulations (such as Punjab Food Authority), fruit drinks have minimum 8% fruit content, nectars have 25-50% fruit content and pure juices have 100% fruit content. In fact, fruit juices are promoted as healthier options by Food Authorities across the country for consumption in schools and colleges.
The Juice industry is playing an integral role in the development and protection of fruit farmers. Fruits have a high rate of wastage and farmers have to sell their produce at very low prices during peak season due to inadequate storage facilities and lack of effective processing or preservation techniques.
The Juice industry, by timely procuring fruits (like Mango, Kinnow, Apple, Guava, etc) from the farmers, at a good rate, prevents significant food wastage in the value chain. This also results in the farmers’ uplift and prosperity.
The industry procured an estimated 100,000 tons of Mango, apart from other fruits, for conversion into pulp from local farmers.
In 2019 with the imposition of 5% FED on fruit juices, the industry took a major hit that resulted in shrinking of the industry size by 23% in 2019-20, almost four times the impact.
The Juice industry of Pakistan also has a high concentration of smaller players that are undocumented and hence not paying any applicable taxes. Imposition of FED will impact affordability of the products produced by documented players, resulting in a large proportion of consumers shifting to low priced, low quality and possibly unsafe alternatives offered by the undocumented sector.
This will impact the government through a loss of tax revenue. In addition, a shrinking business size would create more unemployment, not just within the industry but also negatively impact farmers linked with the industry.
Furthermore, tax collection through application of any additional tax (FED) on fruit drinks and juice products would not have a favorable impact on revenue collection as the business volume would shrink again as happened in 2019-20 while 5% FED was imposed.
The industry, after withdrawal of 5% FED in June 2021, had found its growth momentum and any tax distortion at this time will again disrupt this growing segment.
We would urge your good self to withdraw the 10% FED on juice, as historically such steps had adverse impacts on the industry and consequently the rural economy and the government’s revenue collection.
