ISLAMABAD: The Federal Board of Revenue (FBR) has excluded cotton yarn, grey cloth and raw cotton from the purview of the Export Facilitation Scheme (EFS) and would now be charged at the standard rate of 18 percent sales tax at the import stage.
Under SRO.1359(I)/2025 issued by the FBR on Tuesday, these three items have been excluded from zero-rating facility under the EFS scheme and therefore cotton yarn, grey cloth and raw cotton now chargeable under standard rate regime of sales tax.
The FBR has issued an SRO 1359(I)/2025 to propose amendments in the Export Facilitation Scheme on Tuesday.
Details revealed that there was a major issue pending between the spinning mills and exporters since last one year. Last year, local supply of “yarn” was excluded from the EFS facility and sales tax was imposed on local supply of yarn. They argued that the imported yarn was subjected to exemption, but no exemption on local supplies.
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Resultantly, people switched to imported Yarn which disturbed the working and business of local spinning mills. Local sales of “Yarn” were also affected due to switching over to imported “Yarn”. Now, after chargeability of 18 percent sales tax on the import of yarn, grey cloth and raw cotton, the importers would be required to seek sales tax refunds.
There is confusion in the new SRO that whether “micro fabrics” is subjected to sales tax or not under the revised EFS scheme, sales tax expert added.
According to the SRO.1359(I)/2025, under the revised EFS, the “insurance guarantee” means a guarantee issued by an insurance company duly notified by the Board, having Pakistan Credit Rating Agency rating of AA++, on such format and conditions as prescribed by the Board.
The revised scheme said that the import of compressor scrap and motor scrap shall be allowed for copper content only. The raw cotton, cotton yarn and grey cloth falling under the respective headings of Pakistan Customs Tariff shall be excluded from the scope of EFS. Provided that import consignments of raw cotton, cotton yarn and grey cloth with bills of lading issued within ten days of the issuance of this notification shall he allowed under this scheme.
“Till the notification of the format of insurance guarantee by the Board, the EFS users shall be required to submit bank guarantee, wherever applicable”, SRO 1359(I)/2025 said.
Copyright Business Recorder, 2025
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