The federal government is putting the finishing touches on a plan to introduce Federal Excise Duty (FED) and additional sales tax on a wide range of high-consumption packaged food items in the upcoming 2025-26 budget, aiming to generate an extra Rs. 150 billion in revenue.

Sources indicate that the list of targeted products includes cakes, sweets (mithai), biscuits, sauces, dips, flavoured milk, cereals, syrups, ice cream, and chips. These categories, which have so far enjoyed little or no taxation, are now in the government’s crosshairs as it seeks to boost fiscal revenues without placing additional strain on low-income households.

Industry estimates suggest that the confectionery segment—comprising cakes and sweets—could bring in Rs. 47.4 billion, with Rs. 40.2 billion expected from FED and Rs. 7.2 billion from sales tax. The biscuit category, valued at Rs. 206 billion, is projected to yield Rs. 48.6 billion, including Rs. 41.1 billion in FED at a 20% rate and Rs. 7.4 billion in sales tax. Meanwhile, the chips market, worth Rs. 96 billion, could contribute Rs. 22.4 billion, with Rs. 19 billion from FED and Rs. 3.4 billion from sales tax.

Officials say the new tax structure will be carefully designed to avoid impacting essential food items or burdening lower-income groups. The government believes this approach will not only help diversify and stabilize the country’s revenue base but also support business sustainability and encourage economic activity.