Textile Division summary on ST, CD blocked

Minister for National Food Security and Research, Sikandar Hayat Bosan has reportedly blocked a summary of Textile Division on withdrawal of sales tax and customs duty on the import of cotton, for at least two weeks, on the plea that last purchase from growers would suffer if news of allowing imports goes around, well-informed sources told Business Recorder.
Import of cotton has remained duty free till the slab of 0% was abolished in 2014-15 and customs duty (CD) of 1% was imposed along with the 5% sales tax. Later on 1% slab was made 2% and then 3% along with the 1% additional duty to make it 4%, ie, cotton was subject to 4% CD and 5% sales tax till January 15, 2017.
The textile industry of Pakistan consumes around 12 to 15 million bales of cotton per annum. Sustainability and viability of spinning industry is totally dependent on performance of the domestic crop. Textile industry has to meet this shortage from import of cotton from other countries. The impact of duties are induced in the price of domestic cotton, resulting in increase in cost of doing business for the entire textiles value chain, specially for export-oriented sector in highly competitive international markets. It may also be noted that mills consumption has reduced and entire gap has not been bridged in last two year.
According to Cotton Crop Assessment Committee (CCAC), the cotton crop for the year 2017-18 is expected to be around 12.6 million bales of 170 kilograms each, an increase of 16% compared to last year. Furthermore, 8.13 million bales have arrived in the ginning factories as of November 1, 2017 compared to 6.98 million bales in the same period last year, showing an increase of 17%. It is pertinent to mention here that bulk of the cotton will be lifted from farmers before January 1, 2018.
"To encourage value addition, reduce the cost of doing business and fill the gap between production and consumption as by January 1, more than 95% of the cotton will be lifted from the farmers and it is proposed that similar to last year decision, customs duty and sales tax on imported cotton may be withdrawn," the sources quoted Textile Ministry as saying in its summary to the ECC.
Textile Division has also claimed that the matter has been discussed with secretary Ministry of Commerce, who has endorsed the proposal. The issue was also discussed in a meeting of All Pakistan Textile Mills Association (APTMA) in Lahore, chaired by federal minister for national food security and research on November 13, 2017, who agreed when domestic cotton will be lifted from farmers, the duty may be removed.
Sales Tax Act, 1990 provides that the ECC whenever circumstances exist to take immediate action can exempt any taxable supplies made or import or supply or any goods or class of goods. Similarly, Customs Act, 1969 also provides similar provision. However, any change in the rate of sales tax and customs duty was under the purview of the ECC.
The source said when the proposal on removal of sales tax and customs duty was tabled before the ECC on December 22, 2017, Minister for National Food Security and Research took the stance that since purchases from cotton growers were in the last stages and if ECC approves proposal of the Textile Division, growers will not get due price of their commodity. The ECC deferred the decision for two weeks so that cotton growers could sell their produce at normal prices.