Significant revisions are anticipated in the Federal Excise Duty (FED) framework in the upcoming federal budget for fiscal year 2025-26, with proposals including a doubling of FED on energy drinks from 20 percent to 40 percent.
The Federal Board of Revenue (FBR) is currently reviewing several proposals related to FED, with no relief expected except for possible exemptions on immovable properties. The duty is likely to be leveraged as a key revenue-generating tool in the forthcoming budget.
Last year, FED played a major role in revenue collection, contributing Rs. 289 billion in 2024-25. The FBR had increased excise duties on international air travel and imposed a Rs. 15 per kg FED on the supply of white crystalline sugar to manufacturing, processing, or packaging entities. Additionally, the FED on cement was raised from Rs. 3 per kg to Rs. 4 per kg.
The Finance Act 2024 introduced FED on several goods, including Rs. 44,000 per kg on acetate tow, Rs. 1,200 per kg on nicotine pouches, and a 5 percent ad valorem duty on lubricating oil.
Currently, the FBR is considering adjustments to FED rates on juices and aerated water, though no final decisions have been made. In February 2023, the FED on all types of aerated water was increased from 13 percent to 20 percent, and a 10 percent FED was imposed on sugary fruit juices, syrups, and squashes.
The FBR is also reviewing the FED structure on cigarettes but has no plans to reintroduce a third tier for cigarette taxation.
