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Saturday July 12, 2025

APTMA demands level playing field, removal of GST on local inputs

By Our Correspondent
June 04, 2025
An employee working at a textile factory in Pakistans port city of Karachi, on April 7, 2011. — AFP
An employee working at a textile factory in Pakistan's port city of Karachi, on April 7, 2011. — AFP

KARACHI: Key stakeholders in Pakistan’s textile sector have jointly urged the government to immediately abolish the 18 per cent general sales tax (GST) on locally produced cotton, yarn and fabric, or else impose it equally on imported yarn and fabric, warning that the current policy is severely damaging the domestic industry.

Addressing a joint press conference at the All Pakistan Textile Mills Association (APTMA) House in Karachi on Tuesday, Central Chairperson APTMA Kamran Arshad was joined by Chairperson of the Karachi Cotton Association (KCA) Khuwaja Zubair; Mahesh Kumar, a representative of the Pakistan Cotton Ginners Association (PCGA); Convenor of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Cotton Committee Sham Lal; and other industry leaders including former APTMA central chairperson Asif Inam and Yain Siddik.

The speakers condemned the policy of applying 18 per cent GST on local supplies while maintaining zero-rating on imported inputs, calling it “an anti-Pakistan policy that is bleeding the economy from within”.

While the sales tax on local cotton and yarn is technically refundable, the group pointed out that refund processing is riddled with delays, underpayments, and bureaucratic inefficiencies. “Only 60-70 per cent of refunds are processed, and the rest have been stuck in manual systems for 4-5 years,” they claimed. Small and medium enterprises (SMEs), in particular, face significant disadvantages due to these delays.

The textile industry leaders insisted that they are not opposed to exports but are demanding a level playing field. They argued that the EFS, intended to boost exports, has instead led to an increase in imports of cotton and yarn. “Exporters are now overwhelmingly preferring imported inputs, sidelining local suppliers,” they said.

Providing data to support their claims, the speakers noted that imports of cotton, yarn, and greige fabric surged by $1.5 billion -- from $2.19 billion in FY24 to $3.64 billion in FY25 -- while textile export growth during the same period stood at only $1.4 billion. As a result, net textile exports are expected to fall from $14 billion to $13.6 billion.

The speakers also sounded the alarm on the broader impact of the policy on Pakistan’s textile ecosystem. They reported that more than 120 spinning mills and 800 ginning factories have already shut down, with loom closures triggering protests by workers on the streets of Faisalabad. “This is not just about factories -- it is about livelihoods,” they stressed.

They highlighted that the cotton economy supports between $2 billion and $3 billion in rural incomes, particularly for women involved in cotton picking. The imposition of 18 per cent GST on cottonseed and cottonseed cake -- which they said is unheard of anywhere else in the world -- is pushing farmers’ incomes below sustainability levels and disproportionately affecting the poorest.

The group further claimed that the current policy framework is costing Pakistan as much as $1.5-2 billion in potential net foreign exchange earnings. “Instead of generating local value, we are borrowing expensive loans to pay for avoidable imports,” they warned.

With cotton being Pakistan’s primary import from the US, the speakers noted that Washington has indicated a willingness to export up to 1.5 million bales to Pakistan. US President Donald Trump has also extended an invitation to a Pakistani trade delegation, proposing to double or even triple cotton exports to the country. “But to absorb such volumes, Pakistan needs a viable and operational spinning industry,” they cautioned.

The group urged the government to restore the EFS to its June 2024 status, reinstating zero-rating for local supplies. “We have held meetings with the finance minister, FBR leadership, and even IMF representatives. However, the IMF has so far refused to support the restoration of zero-rating,” they said.