APTMA seeks SRO for 18pc sales tax on cotton, yarn imports

ISLAMABAD: The All Pakistan Textile Mills Association on Friday asked Finance Minister Muhammad Aurangzeb to fulfil the budgetary commitment made in the budget speech and impose 18 per cent sales tax on all imports of cotton fibre, yarn of all kinds, and greige fabric, while retaining these items under the Export Facilitation Scheme (EFS).

In a letter written on Friday to the finance minister, Chairperson of APTMA Kamran Arshad reminded the FM that the original request was for their complete exclusion from the EFS considering the damage caused by unnecessary imports to the domestic industry. Nevertheless, the important correction of equalising the tax treatment of local and imported supplies for exports was pledged during the announcement and presentation of the budget.

It has now been a month and a half since the budget speech and almost three weeks since the budget was passed and as per the Deputy Prime Minister’s Committee’s decision, sales tax was to be imposed from July 15 onwards and this date has also passed.

The letter mentions that the requisite SRO has not yet been issued. The delay coincides with the arrival of the new cotton crop, for which there are no buyers in the market. The tax disparity has eroded demand for locally grown cotton and domestically manufactured yarn and greige cloth.

Given the continued uncertainty regarding the imposition of equivalent sales tax on imports, traders and mills are unwilling to off-take the new crop. Textiles account for over half of Pakistan’s exports and represent one of the few sectors showing robust growth -- exports increased by $1.5 billion in FY 2024-25. However, during the same period, textile sector imports rose by approximately $1.5-2 billion, yielding a net loss for the balance of payments.

The current account remains precariously balanced only due to temporarily low international oil and gas prices. This situation cannot be sustained in the medium or long term. Pakistan must increase the share of domestic value addition in its exports, yet current policy incentives run counter to that objective.

Any further delay in issuing the promised SRO will exacerbate mill closures, businessmen migrating abroad, and the loss of hundreds of thousands of jobs. To safeguard the livelihood of our growers, spinners, and exporters-and to uphold the government’s own fiscal and export targets- APTMA requests that the SRO for imposition of 18 per cent sales tax on cotton fibre, yarn and greige cloth imports be issued without further delay.