The federal government is considering a reduction in the federal excise duty (FED) on aerated beverages in the 2025–26 budget, in a move aimed at encouraging foreign direct investment (FDI), particularly from Turkish investors. According to Business Recorder, the plan is currently under review by budget planners and may offer a significant tax relief to one of Pakistan’s most heavily taxed industries.
Since 2018, global beverage companies, including those with Turkish and Korean partnerships, have invested over $2 billion in Pakistan. However, no new foreign investment has been recorded since 2023, largely due to what industry insiders describe as a burdensome fiscal regime. In 2023, the government raised the FED on fizzy drinks from 13% to 20%, which investors say caused a steep drop in sales volumes, reduced production to 2018 levels, and brought plant capacity down to 60%.
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Despite contributing over Rs175 billion in various taxes, the sector claims the current 38% combined tax burden (20% FED and 18% GST) is stifling growth. Industry stakeholders argue that reducing FED to 15% could boost demand, revive a $300 million stalled investment, and generate around Rs38 billion in additional revenue over two years.
With nearly 500,000 households and 16 associated sectors linked to the beverage industry, representatives warn that continued high taxation could lead to job losses and disinvestment. They urge the government to adopt a balanced tax policy to restore investor confidence and promote sustainable economic growth.
