LAHORE: The All Pakistan Textile Mills Association (APTMA) has submitted 20 detailed budget proposals to the federal government, calling for fundamental changes to the country’s sales tax structure as the textile sector battles severe liquidity pressures, regulatory overreach, and declining competitiveness.
A central theme of APTMA’s submission is reining in what it describes as unchecked discretionary powers exercised by tax officials against compliant businesses. The association wants the authority to suspend taxpayers, blacklist them, block bank accounts, or cancel registration numbers removed from field-level officers and placed exclusively with the Federal Board of Revenue. It also proposes that any such decisions be made by a committee that includes trade body representatives, introducing a layer of institutional accountability currently absent from the process.
On administrative reforms, the APTMA has called for extending the window for claiming input tax adjustments to 12 months, mandating a seven-day turnaround on registration applications, and enabling taxpayers to file revised returns with any shortfall payment without needing prior commissioner approval, a move the association says would encourage voluntary compliance.
Citing binding rulings from both, Lahore High Court and the Supreme Court, the APTMA is pushing for legislation that formally prevents arrests or detentions before a taxpayer’s civil liability has been determined. The association wants these judicial precedents codified into law to stop criminal proceedings from being used as leverage before tax disputes are resolved.
It has also called for the removal, or strict limitation, of provisions under Sections 40B and 40C of the Sales Tax Act that allow officers to be physically stationed at business premises, arguing these powers are routinely exploited for corruption and extortion.
Among the most pressing demands is the immediate clearance of all outstanding sales tax refunds, which the APTMA says have been unlawfully withheld for extended periods. The association is demanding that FASTER refunds be processed within 48 hours and that all pending refunds cleared within the 72-hour window already prescribed by law but widely ignored in practice. The APTMA estimates that resolving the refund backlog alone could unlock an additional USD3–4 billion in annual export capacity.
On rates, the APTMA has called for restoring zero-rating across all manufacturing stages of the textile value chain, with sales tax applied only at the point of final consumer sale. It argues that levying 18 percent tax at multiple production stages fuels invoice fraud, deters investment, and has driven many textile units to partial or full closure.
As an interim step, the association proposes a 1 percent annual reduction in the standard rate until it reaches 15 percent. More ambitiously, it advocates a tiered GST model similar to India’s framework: 5 percent on raw materials such as cotton and man-made fiber, 10 percent on intermediary goods, and the standard rate on finished consumer products. The APTMA believes this structure would ease cash flow pressures, lower production costs, and improve compliance, particularly among smaller manufacturers.
The APTMA has called for the complete removal of sales tax on cotton imports, noting that cotton’s seasonal nature forces mills to purchase large volumes in a narrow window, locking up working capital for months. It warns that the withdrawal of previously available reduced rates, combined with soaring energy costs, has pushed many mills to the edge.
On man-made fiber, the association sounded a sharp alarm, disclosing that the MMF yarn imports surged to 42 million kilograms in just the first half of fiscal year 2025-26, triggering the closure of more than 140 spinning units. The APTMA is demanding that all MMF yarns and fabrics be excluded from the export facilitation scheme, which it says is being misused to flood the domestic market with cheap imports at the expense of local producers.
The APTMA has also challenged a provision under Section 45B that bars appellants from introducing new documentary evidence before the Commissioner of Appeals if it was not submitted at the initial assessment stage, calling it a denial of basic legal rights.
Finally, the association has requested the withdrawal of STGO No. 08/2025, which places monitoring obligations on spinning units to track undocumented cotton bales. The APTMA argues the problem originates at the ginning stage and that burdening spinning units is both misdirected and ineffective. It has instead proposed a national cotton traceability system focused at the ginning level as the only genuinely workable solution.
Copyright Business Recorder, 2026
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