LAHORE – The federal government has withdrawn the 20 per cent federal excise duty (FED) on certain low-sugar sports and hydration beverages through an amendment to the Finance Bill 2026 as part of the FY2026-27 budget.
Under the amendment, mineral water, aerated water, hydration drinks and electrolyte beverages specifically formulated to support hydration and electrolyte replenishment will no longer be subject to the 20pc FED if they contain artificial sweeteners or sugar, or both, not exceeding five grams per 100 millilitres.
The exemption is expected to benefit products such as Gatorade and Revive, sports drink brands marketed by PepsiCo, which had been at the centre of a tax dispute with authorities.
While the Federal Board of Revenue maintained that the products fell within the scope of the excise duty on beverages, the companies argued that their low sugar content and electrolyte formulation distinguished them from sugary drinks subject to the levy.
The change has been introduced through amendments to the Federal Excise Schedule under the Federal Excise Act via the Finance Bill 2026. Previously, the 20pc FED applied to mineral water, aerated water, hydration drinks and electrolyte beverages irrespective of their sugar or artificial sweetener content.
The amended provision excludes “mineral water, aerated water, hydration drinks, or electrolyte beverages specifically formulated to support hydration and electrolyte replenishment, containing artificial sweeteners or sugar, or both, not exceeding 5g per 100ml” from the scope of the excise duty.
The amendment follows concerns raised by the United States Embassy in Islamabad, which had urged the Ministry of Finance to address tax and customs disputes affecting multinational beverage companies operating in Pakistan.
The embassy said resolving issues related to customs classification, taxation and the FED would help support PepsiCo Pakistan’s manufacturing operations and encourage future foreign direct investment.
