The federal government is preparing to introduce significant tax increases on a wide range of food and beverage products in the upcoming 2025–26 budget, as part of broader efforts to increase tax revenue and balance fiscal reforms.
According to sources familiar with the matter, excise duties on popular items like soft drinks, sweetened beverages, fruit juices, soda water, and flavoured sweets could double — rising from the current 20% to 40%. The tax adjustment would also cover carbonated beverages derived from fruit pulp or juice, syrups, and concentrated squashes.
In addition, a new 20% excise tax is reportedly being considered for industrial dairy products, further expanding the scope of taxed goods. Meat products such as sausages and processed or preserved meats — including dried, salted, or smoked varieties — may also be subject to increased levies.
Bakery and confectionery items are expected to be hit particularly hard, with taxes on products like chewing gum, chocolate, candy, biscuits, caramels, and breakfast cereals projected to rise by as much as 50%.
Frozen desserts, flavoured yoghurts, ice cream, and other goods made using animal or vegetable fats are also on the list for potential increases. The government is reportedly planning to implement the tax hikes gradually over a three-year period, ultimately reaching a 50% increase on affected categories.
These measures are expected to have a direct impact on consumer prices, especially for everyday food and snack items, raising concerns about inflationary pressure on household budgets.
Meanwhile, the proposed 2025–26 budget is also expected to include a substantial boost to the defence sector. The defence allocation is projected to rise by Rs159 billion, reaching a total of Rs2,281 billion. This marks a 7.49% increase compared to the current fiscal year’s Rs2,122 billion allocation and a 14.16% rise from the Rs1,858.8 billion allocated in 2023–24.
The steady year-on-year increase — a total of Rs263.2 billion over two years — highlights the government’s ongoing prioritisation of national security, even as it seeks to implement tax reforms and manage budgetary constraints.
Analysts note that while the defence budget increases are likely to proceed smoothly, the proposed tax hikes on food and beverages may attract criticism from consumers and industry groups, particularly as the cost of living continues to rise.
