ISLAMABAD: The government is contemplating to provide major relief to the beverage industry in coming budget 2020-2021 by proposing reduction in the federal excise duty (FED) from existing 13 percent to nine percent, reflecting a reduction of four percent.

Sources told Business Recorder that Advisor to Prime Minister on Finance Abdul Hafeez Shaikh had assured relief to the beverage industry in the coming budget.

The beverage industry has conveyed to the advisor that the companies would provide relief to the consumers after reduction in the FED on beverages.

The industry has also informed Hafeez Shaikh that the industry is also ready to provide extraordinary relief to the consumers, in case the FED reduction has been done by six percent.

The prices would be reduced for the general masses, keeping in view the relief being provided to the industry.

The industry has submitted two proposals to the government.

First, reduction in the FED from 13 percent up to 6.5 percent to pass on maximum price reduction to the general public.

Second, the FED on beverage concentrate should be reduced from 50 to 25 percent to avoid unabsorbed FED.

This would not have any impact on the FBR's revenue.

The government has allowed the beverage industry wastage of six percent and value of such wastages stood at around Rs2 billion.

This wastage facility has been deliberately used to evade taxes and commit tax evasion.

The government must reduce the percentage of beverage wastage or abolish the same in the coming budget.

The pre-Covid-19 (fiscal year 2019-2020) situation revealed that the FED was raised from 11.5 percent to 13 percent on beverages.

Resultantly, the industry showed a decline of 10 percent during July-March (2019-2020).

The negative gross revenue outlook of the industry is evident from the fact that negative growth of 10 percent is seen during pre-Covid period.

The beverage industry witnessed one of the worst years in recent past due to the FED increase, rising input costs and slow economy.

The Covid-19 impact revealed that the industry growth nosedived by 40-65 percent during current fiscal as compared to last fiscal without price reductions in beverages.

There was corresponding devastating impact on small businesses, retailers, ancillary industries and deep negative Gross Revenue outlook, the industry added.