The Federal Board of Revenue (FBR) on Tuesday issued the delayed Statutory Regulatory Order (SRO) imposing an 18% sales tax on the import of cotton fibre, yarn, and grey cloth, following persistent requests from the All Pakistan Textile Mills Association (Aptma).
The measure, which aligns with commitments made in the 2025-26 federal budget, comes nearly a month after the budget announcement and over three weeks after receiving formal cabinet approval. Industry stakeholders noted that the delay had created uncertainty, affecting domestic cotton producers.
SRO 1359(I)/2025 specifies that raw cotton, cotton yarn, and grey cloth will no longer be part of the Export Facilitation Scheme (EFS), but exempts consignments with bills of lading dated within 10 days of the notification.
Aptma had urged Finance Minister Muhammad Aurangzeb to issue the notification promptly, emphasizing the importance of the 18% sales tax in addressing the tax disparity between imported and domestic inputs.
In a letter dated July 18, Aptma Chairman Kamran Arshad reminded the government that the budget outlined the inclusion of these imports in the 18% tax bracket, though the government opted to equalize tax treatment instead of fully removing the imports from the facilitation scheme.
Despite cabinet approval and a July 15 implementation date set by a committee led by Deputy Prime Minister Ishaq Dar, the delay in issuing the SRO drew criticism from Aptma, which warned that the timing had worsened demand for the new cotton crop. Traders and mills, uncertain due to the policy delay, were reluctant to make purchases, putting the domestic cotton and yarn sectors at risk.
Pakistan’s textile sector, which contributes over 50% of total exports, saw a $1.5bn increase in export earnings in 2024-25. However, this gain was offset by a $1.5-2bn rise in imports, leading to a net negative impact on the country’s balance of payments. Aptma asserts that such imbalances can only be corrected through timely and consistent policy implementation.
