Duty, tax exemptions proposed on cotton import

KARACHI: The All Pakistan Textile Mills Association (Aptma) on Monday urged the government to allow duty and sales tax exemption on import of raw and ginned cotton, considering the shortfall in the local cotton output.

In their budget proposals for the fiscal year 2016/17 sent to the Finance Ministry, the textile millers said that the government in the last budget imposed sales tax at five percent on the import of raw and ginned cotton. On the other hand, the local cotton remained exempted from the sales tax.

In its proposals, the textile manufacturers said that the industry consumes around 16 million bales annually, whereas the total production of cotton in Pakistan is around 13 million bales due to which the spinning sector of Pakistan has to import around 25 percent of its consumption requirement, majority of which is long staple and contamination-free cotton, which is not available in the country.

“This cotton is used to manufacture high value yarn and in turn high added products, which are mainly exported in one form or another,” the association said.

The textile millers said that in order to avoid cumbersome procedure of the sales tax refund, there should be no sales tax on raw cotton and ginned cotton at the import stage.

“The aspect of levy of tax to discourage import of cotton and to encourage local cotton is not applicable, as they are not substitute of one another,” according to the proposals.

Regarding Customs duty on the import of raw cotton, Aptma said that in the budget 2014/15 one percent duty was imposed, which was further increased to two percent in the last budget.  Through budgetary measures in November 2015, the government further enhanced the duty rate by one percent. “Due to three percent duty, the cost of production has further increased, as the prices of local cotton also increased in tandem with the imported cotton prices,” it said.

Due to the crop failure this year, the industry had to import more cotton as compared to the previous year; therefore, duty and tax should be exempted on the import of raw cotton. 

On the other hand, Aptma demanded 15 percent imposition of regulatory duty on the import of yarn and fabric under the Customs Tariff Chapter 55.  The proposal has been forwarded in order to save domestic industry from the onslaught of dumped imports and to provide them with a level-playing field.

The association also demanded that the duty on import of manmade fibres such as polyester, viscose, acrylic and nylon should be reduced to zero percent.