Cotton fiber, yarn, greige cloth: 18% ST imposed on import?

ISLAMABAD: The Federal Government has reportedly imposed an 18 percent sales tax on the import of cotton fibre, yarn, and greige cloth, following nearly a month-long delay, amid sustained pressure from the All Pakistan Textile Mills Association (APTMA).

On July 18, 2025, APTMA formally urged Finance Minister Senator Muhammad Aurangzeb to issue a Statutory Regulatory Order (SRO) immediately to implement sales tax on these imports, in line with commitments made in the Federal Budget 2025–26.

In a letter to the Finance Minister, APTMA Chairman Kamran Arshad emphasised the budget’s announcement that cotton fibre, yarn, and greige cloth imports would be subjected to 18 percent sales tax, while remaining under the Export Facilitation Scheme (EFS).

Selective buying on cotton market

“The Federal Cabinet has approved the Finance Ministry’s summary through circulation to fulfil the commitment made to APTMA,” the sources confirmed.

APTMA had initially sought complete exclusion of these imports from the EFS, arguing that unrestricted imports were harming domestic industry. However, during the budget process, the government instead committed to equalizing the tax treatment of local and imported inputs used for exports, rather than removing them from the scheme altogether.

The Association, in its letter, criticized the delay, noting that substantial time had passed since the budget speech and over three weeks since its formal approval. According to a decision by the Deputy Prime Minister’s Committee, the tax was originally meant to take effect on July 15.

APTMA warned that the delay had coincided with the arrival of Pakistan’s new cotton crop, which was facing a lack of buyers due to market uncertainty. The tax disparity, they stated, had eroded demand for locally grown cotton and domestically produced yarn and greige cloth.

The Association further argued that, in the absence of a level playing field, both traders and mills were reluctant to purchase the new crop. The textile sector — which accounts for over 50% of Pakistan’s total exports — has shown robust growth with a $1.5 billion increase in FY 2024–25. However, the sector also saw a $1.5–$2 billion rise in imports, resulting in a net negative effect on the balance of payments.

Copyright Business Recorder, 2025