After Long Wait, 18% Sales Tax on Cotton Imports Takes Effect
ISLAMABAD – In a move that has sent shockwaves through the textile industry, Pakistan’s Federal Board of Revenue (FBR) has finally imposed an 18% sales tax on cotton imports after weeks of bureaucratic delays that left the market in turmoil.
The Breakdown:
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Tax Scope: Covers raw cotton, yarn, and grey fabric imports
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Effective Date: Immediate, with 10-day grace period for shipments in transit
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Policy Shift: Removes these items from Export Facilitation Scheme benefits
Industry in Uproar Over Rollout Chaos
The implementation, coming nearly a month after budget approval, has drawn fierce criticism from textile manufacturers who claim the government’s sluggish decision-making has:
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Created a market freeze during peak procurement season
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Forced mills to halt raw material purchases
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Left farmers holding unsold crops
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Potentially cost the sector millions in lost productivity
Behind the Delays:
Multiple sources confirm the notification was held up by:
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Last-minute bureaucratic wrangling
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Lobbying efforts from various stakeholders
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Coordination failures between ministries
Economic Fallout:
The textile sector, which contributes:
✔ 60% of Pakistan’s exports
✔ 40% of industrial employment
✔ $20 billion in annual shipments
now faces renewed challenges just as global demand shows signs of recovery.
What This Means:
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Local cotton prices may surge short-term
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Import-dependent mills face profit squeeze
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Export competitiveness at risk
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Policy credibility takes another hit
Expert Take:
“This isn’t just about the tax – it’s about how it was handled,” said textile analyst Mehreen Ahmed. “The stop-start policymaking is making Pakistan look unreliable to international buyers.”
Looking Ahead:
With the cotton season in full swing, all eyes are on:
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How quickly mills can adjust sourcing
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Whether domestic production can fill the gap
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Potential knock-on effects on export orders
The FBR maintains the tax will protect local farmers, but industry leaders warn the chaotic implementation may do more harm than good.
