Higher Tax Likely on Packaged Food (Milk, Chips) in Budget 2025-26

In an effort to boost fiscal revenue without burdening low-income groups, the federal government is set to impose Federal Excise Duty (FED) and additional sales tax on high-consumption packaged food items in the upcoming 2025-26 budget, aiming to generate Rs150 billion.

The proposed FED on packaged food in Budget 2025-26 will cover products such as cakes, sweets (mithai), biscuits, sauces, dips, flavoured milk, cereals, syrups, ice cream, and chips. These items, which are currently untaxed or lightly taxed, are being reconsidered as a way to diversify revenue streams and support economic sustainability.

Industry estimates suggest significant tax contributions across categories. The confectionery segment, including cakes and sweets, is expected to contribute Rs47.4 billion—Rs40.2 billion through FED and Rs7.2 billion via sales tax.

The biscuit industry, with a market value of Rs206 billion, could bring in Rs48.6 billion in taxes, comprising Rs41.1 billion from FED (at 20%) and Rs7.4 billion in sales tax. Meanwhile, the chips category, worth Rs96 billion, is projected to generate Rs22.4 billion—Rs19 billion in FED and Rs3.4 billion in sales tax.

Officials emphasize that the FED on packaged food in Budget 2025-26 will be carefully structured to avoid affecting essential food items or placing undue pressure on lower-income populations. The move is positioned as a step toward a broader, more stable, and equitable tax base that promotes both economic activity and long-term fiscal sustainability.