ISLAMABAD: The government can easily generate handsome amount of revenue to the tune of billions by imposing federal excise duty (FED) on alcoholic beverages in the upcoming budget (2025-26).
According to tax experts consulted by Business Recorder, the tax structure surrounding alcoholic beverages, particularly beer, has been a largely neglected topic despite its substantial potential for generating significant revenue for the government. This is especially pertinent as the government is approaching the upcoming budget for the fiscal year 2025-26, where there is a pressing need for innovative revenue generation strategies.
They explained that the beer is classified under the Harmonised System (HS) code 22.03. It is currently taxed under the standard rate of value added tax (VAT) mode. This classification means that beer is not subject to taxation based on the retail price, unlike many other consumer products, which are taxed on their Maximum Retail Price (MRP).
This unique approach places beer in a different category compared to aerated waters and various other beverages, leading to potential revenue losses for the government.
Under the Pakistan Customs Tariff (PCT) tariff, 90 percent customs duty is applicable on the import of beer/wine.
An intriguing aspect of the current tax environment is the absence of a FED on the sale of alcoholic beverages, including beer. The reasons for this omission are unclear and warrant further investigation, given the significant revenue that could be derived from such a tax.
Currently, due to pressing need of generating higher tax revenue target, the Federal Board of Revenue (FBR) appears to even focusing on levying more taxes on different sectors including packaged food, dairy products, packaged milk, non-alcoholic beverages, fruit juices, aerated waters, and energy drinks as areas to enhance revenue collection for the fiscal year 2025-26.
This strategy may however, overlooked the lucrative opportunity that the taxation of alcoholic beverages presents.
Copyright Business Recorder, 2025
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