The Senate Standing Committee on Finance has raised serious concerns about the proposed tax measures in the budget for the next fiscal year, warning that they will fuel inflation in the country and increase malnutrition.

The committees recommendations to finance ministry and FBR will include withdrawal of 18% GST on child nutrition products, according to news reports in the media.

Committee chairman Senator Saleem Mandviwalla made these remarks during the committee meeting on Saturday. Criticising the imposition of taxes on basic food items, the committee rejected the proposed taxes on locally produced baby food and infant nutrition, as well as packaged milk.

The budget drew ire from lawmakers from both the ruling PML-N and PPP, as well as opposition Senators, with FBR being criticized for heavy taxation on essential items, as it will make life difficult for the common man.

The committee rejected the proposal to impose an 18 percent sales tax on baby milk, with members voicing concerns about how such a measure could be allowed in a country with a 40 percent stunting rate. PML-N Senator Anusha Rehman and PPP Senator Sherry Rehman both criticized the increase in sales tax on milk as cruel and noted that no consultation was held before making the decision.

In his budget speech, Finance Minister Muhammad Aurangzeb emphasized the vital importance of nutrition during the first 1,000 days of a child's life and the urgent need to address stunting. However, industry experts see the proposed 18% GST on locally produced infant formula, baby food, and child nutrition milk powders as counterproductive and misaligned with the government's stated goals.

In earlier meetings, industry representatives cognizant of the challenges being faced by the economy suggested three-year phase-wise general sales tax as a win-win solution for both the government and the industry, with the 5% on Y1, 10% Y2 and 18% on Y3.

Amid high inflation, it is crucial to recognize that locally produced infant formula, baby food, and fortified child nutrition milk powders are approximately 50% less expensive than imported versions, making them more affordable for the general population and less burdensome on foreign exchange reserves.