ECC proposed to withdraw all taxes on cotton import

ISLAMABAD: Economic Coordination of Committee (ECC) of the Cabinet has been proposed that custom duty, additional custom duty, and sales tax on imported cotton be withdrawn immediately, The News has learnt on Tuesday.

In response to the proposal for the abolition of taxes on cotton import, the ECC, which met here with Finance Minister Asad Umar in chair to reviewed different sectors of the economy and the vital economic indicators, asked the Textile Division for details/data on the impact of such proposals on revenue and trade.

According a summary of proposals presented to the ECC by the Textile Division, as by January 1, 2019 more than 95 percent of the cotton will be lifted from the farmers in a bid to encourage value-addition, reduce the cost of doing business and fill the gap between production and consumption. Textile Division has asked the ECC of the Cabinet to accord approval to the proposals at the earliest. As per details, Pakistan is a net cotton importer since 2001. Domestic cotton is of short to medium staple length therefore, long and extra long staple cotton has to be imported for production of finer yarn counts for subsequent transformation into high value-added finished products.

Import of cotton has remained duty free until the 0 percent slab was abolished in 2014-15 and Custom Duty (CD) of 1 percent was imposed along with a 5 percent sales tax. Later, 1 percent slab was increased to 2 percent and then 3 percent along with a 2 percent additional duty to make it 5 percent –currently cotton is subject to 3 percent CD, 2 percent additional custom duty, and 5 percent sales tax.

Prime Minister’s Package of Incentives for exporters was announced on January 10, 2017, wherein textile sector was provided a number of facilitations, including withdrawal of customs duty and sales tax on imported cotton starting from January 16, 2017.

The textile industry of Pakistan consumes around 12 to 15 million bales per annum. Sustainability and viability of spinning industry is completely dependent on performance of the domestic crop. Textile industry has to meet any shortages by using imported cotton from other countries. The impact of duties is induced in the price of domestic cotton, resulting in increase in cost of doing business for the entire textiles value chain especially for export oriented sector in highly competitive international markets.

According to Cotton Crop Assessment Committee (CCAC) meeting held by MNSFR in September 2018, the cotton crop for the year 2018-19 is expected to be around 10.78 million bales of 170 kilogram, a decrease of 9.7 compared to last year and a decrease of 24 percent against the initially fixed target of 14.37 million bales. Further 9.62 million have already arrived in the ginning factories as of December 15, 2018.

Meanwhile, the ECC of the Cabinet has also instructed Ministries of Industries and Production to submit an operationalisational plan of Pakistan Steel Mills within sixty days.