FBR ends zero-rating for cotton products under EFS

ISLAMABAD: The Federal Board of Revenue (FBR) has excluded raw cotton, cotton yarn and grey cloth from the Export Facilitation Scheme (EFS), while retaining iron and steel scrap under its scope with certain conditions.

According to SRO 1435(I)/2025 issued by the FBR on Tuesday, the three textile-related items have been excluded from the zero-rating facility under the EFS. Consequently, raw cotton, cotton yarn and grey cloth will now be subject to the standard rate regime of sales tax. The import of compressor scrap and motor scrap will be allowed based solely on the copper content. The notification states that raw cotton, cotton yarn and grey cloth—falling under their respective headings of the Pakistan Customs Tariff—shall be excluded from the scope of the EFS. However, import consignments of these items with bills of lading issued within 10 days of the notification’s issuance will still be allowed under the scheme.

The notification also provides that EFS users may acquire new raw materials up to 10% of their total authorisation without requiring prior approval from the Regulatory Collector or the Input-Output Coefficient Organisation.

“Copper content for motor scrap shall be allowed at 10% by weight, and for compressor scrap at eight percent by weight,” the SRO stated. Customs duties, sales tax, and withholding tax shall be applicable at the import stage on the remaining steel scrap component, which shall only be sold to sales tax-registered melters.

In exceptional cases, a committee comprising senior officers from the FBR, the Ministry of Commerce, and Ministry of Industries and Production may grant an extension of up to nine months for the utilisation period, with reasons to be recorded in writing, the revised EFS added.