Fruit farmers ask Punjab CM to lower 20% tax on fruit juices

The purchase of pulp from Sargodha, Rahim Yar Khan, and Multan has seen a drastic decline over the past year due to regressive tax policies implemented by the federal government, according to industry officials.

On Wednesday, these officials stated that fruit farmers have appealed to Chief Minister Punjab Maryam Nawaz to alleviate the burden of federal excise duty on packaged juices. They highlighted that pulp purchases by pulping units in Punjab have significantly decreased in the last year, leading to substantial losses.

Fayyaz Chaudhry, who owns 20 acres near Multan and cultivates two to three varieties of Chaunsa mangoes, primarily for export, expressed concerns about increasing yields coupled with persistent wastage due to the perishable nature of mangoes and insufficient storage facilities. He explained, “While most of our produce is exported, there are fluctuations in demand. During downturns, we resort to selling to local pulp producers who cater to juice manufacturers.”

Chaudhry emphasized the plea to Chief Minister Punjab Maryam Nawaz to intervene and mitigate the adverse impacts of federal government policies.

Fruit farmers are already contending with the repercussions of regressive taxation policies on the juice industry, which have led to a decrease in the market for surplus produce and export leftovers. The imposition of a 20 percent federal excise duty (FED) on fruit juice manufacturers in the last federal budget has notably diminished the market for surplus produce and export leftovers.

Consequently, the juice industry has curtailed its purchases of fruit pulp, prompting pulp manufacturers to reduce their fruit procurement due to diminished demand. Traditionally, fruit orchard owners sold their surplus produce and abundant yields to pulp manufacturers, who in turn supplied juice companies, establishing a value chain beneficial to local growers. Annually, over 100,000 tonnes of fruits such as guava, mangoes, apples, oranges, and strawberries are purchased.

The local juice beverage industry has been burdened with escalating taxes in recent years. The 2023-2024 budget escalated the FED from 5 percent (plus 17 percent sales tax) in 2018-2019 to 20 percent (plus 18 percent sales tax), resulting in a total tax impact of 42 percent, as the sales tax is applied after the 20 percent FED.

Policymakers overlooked the cumulative effects of heightened taxation, a more than 50 percent surge in raw material costs, and inflationary pressures on prices. Instead of augmenting overall tax revenue, these measures have led to a decreased tax contribution from the beverage sector to the national treasury.

Industry officials noted a 41 percent drop in volume subsequent to the imposition of the CED, with production suspended for over 100 days annually. Before the recent FED hike, the fruit juice industry flourished, boasting a turnover of approximately Rs60 billion, investments of Rs40 billion, and significant job creation. Consumers enjoyed the benefits of heightened competition, which expanded the product range to encompass healthier, sugar-restricted options.

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