Pakistan’s dairy industry could soon receive a significant policy boost as the government weighs a reduction in general sales tax (GST) on dairy products from 18% to 10%. While the proposal may appear to be a straightforward tax adjustment, it is part of a wider effort to modernize and strengthen a sector that plays a vital role in the country’s economy.
The discussion was initiated during a meeting between Federal Minister for Commerce Jam Kamal Khan and members of the Pakistan Dairy Association. Industry representatives used the opportunity to highlight longstanding challenges, particularly the heavy tax burden, low productivity levels, and the largely undocumented nature of the dairy supply chain. In response, the government has asked for formal proposals to evaluate the feasibility and impact of reducing the GST rate.
At present, the 18% tax on dairy products is considered high compared to global practices, where many countries either exempt such essential food items or apply minimal taxation. Lowering the GST could ease pressure on consumers while also encouraging businesses to operate within the formal economy, ultimately improving documentation and compliance.
However, officials have made it clear that tax relief alone will not be enough to transform the sector. A key concern remains the low productivity of dairy farming in Pakistan, which is often linked to poor genetic quality of livestock. Without systematic breeding programs and proper farmer guidance, milk yields remain below potential. Addressing this issue has been identified as a priority for long-term improvement.
In addition to tax reforms, the Pakistan Dairy Association has suggested several structural changes. These include expanding access to financial services for farmers, introducing stricter regulations to ensure that only pasteurized and properly packaged milk reaches consumers, and launching pilot projects in urban areas to gradually formalize the dairy supply chain.
The push for formalization is particularly important. Much of Pakistan’s milk distribution still takes place through informal channels, especially in cities where loose milk is widely consumed. Bringing these operations into a regulated framework could improve quality standards, enhance food safety, and increase transparency in the market.
Training programmed for farmers and cross-breeding initiatives have also been proposed as ways to boost efficiency and output. By improving livestock quality and farming practices, the sector could achieve higher productivity and better returns for those involved in dairy production.
To ensure progress, the government has assigned Prime Minister’s Coordinator Rana Ihsaan Afzal to lead consultations and develop a comprehensive policy plan in collaboration with stakeholders. Coordination with provincial governments is also expected to play a key role in implementing any reforms effectively across the country.
Overall, the proposed GST reduction is just one element of a broader strategy aimed at unlocking the potential of Pakistan’s dairy industry. If combined with meaningful reforms and consistent implementation, these measures could help create a more efficient, regulated, and economically robust sector.
The success of this initiative will ultimately depend on how well these ideas are translated into action. But for now, the direction suggests a growing commitment to addressing both the immediate and structural challenges facing the dairy industry.