Textile exporters demand govt address unresolved budget anomalies

FAISALABAD: The textile export industry has urged the Government to immediately address unresolved budget anomalies as continued inaction could disrupt exports and weaken exporters’ confidence.

Pakistan stands at a crossroads and with right policy support; exporters can generate growth, employment, and economic stability, said Chairman Pakistan Textile Exporters Association Sohail Pasha.

He pointed out that Pakistan’s value-added textile sector contributes over $9 billion to national exports annually, supports millions of livelihoods, and remains a key pillar of the country’s economic stability. Yet, this sector is currently facing severe setbacks due to taxation measures introduced in the Finance Act 2024, which replaced the simplified Final Tax Regime (FTR) with the more burdensome Normal Tax Regime (NTR).

He said export proceeds are subjected to deduction of 1% Advance tax under Section 154 as minimum tax. Simultaneously, an advance tax @1% has been levied through insertion of sub-section (6C) in section 147; however, contrary to these local supplies are liable to payment of 1% advance tax. Treatment meted out to exporters is discriminatory and against the principles of equity and natural justice, he lamented.

He added that despite repeated representations and firm commitments, the budget-makers have failed to correct this anomaly. Meanwhile, the Export Facilitation Scheme (EFS), previously essential for importing raw materials not produced locally or required by international buyers from nominated suppliers, has been burdened with excessive conditions, restricting access to critical inputs and damaging export competitiveness.

Highlighting the serious concerns regarding the amendments made to the EFS, particularly the removal of zero-rating on local procurement of input goods and the imposition of sales tax at the import stage of cotton yarn, he stressed that these changes undermine the very objectives of EFS, which was introduced to simplify export procedures, reduce liquidity pressure, and promote digital traceability.

He demanded the restoration of the original EFS framework which allowed zero-rated invoicing on local purchases and exempted key raw materials such as cotton yarn from sales tax at the import stage. He noted that Pakistan’s regional competitors like Bangladesh and Vietnam continue to provide tax-free access to raw materials for their export industries, giving them a clear advantage in global markets.

Pointing out another major issue, Sohail Pasha said that the budget has placed a further strain on exporters’ liquidity without making strategy for release of liquidity stuck in Duty Drawback of Local Taxes (DLTL), Technology Upgradation Fund (TUF) and Mark up Support Scheme regimes.

He said that around PKR 36 billion are pending for payment under textile policy incentives and if these amounts are released, exporters can deploy the capital towards expanding their businesses, which in turn will help Pakistan’s export earnings grow. Considering high production cost a major hurdle in export growth, he said that no strategy is designed to reduce the production cost of export items in the budget. Similarly, no relief is given to the export industries in energy input prices which are the major element of production cost.

He feared that the budgetary measures would erode the competitiveness of Pakistani exporters in the global market, potentially leading to a decline in export revenue and foreign exchange earnings. He urged the government to reconsider the budgetary measures and restore the confidence of exporters by addressing the anomalies to achieve the desired targets.

Copyright Business Recorder, 2025