APTMA hails sales tax on imported yarn, urges broader reform of EFS

The All Pakistan Textile Mills Association (APTMA) on Wednesday welcomed the government’s decision to impose an 18% sales tax on imported cotton yarn, calling it a positive move toward correcting distortions in the country’s Export Facilitation Scheme (EFS). However, the association urged authorities to complete broader reforms to ensure competitiveness across the domestic textile value chain.

In a statement, APTMA said while the tax move demonstrates the government's commitment to restoring fairness, it falls short of addressing core anomalies in the EFS. The scheme currently allows zero-rated sales tax on imported inputs for exports, while domestic inputs for the same exports are taxed at 18%.

“This creates a gross disadvantage for local manufacturers,” said Kamran Arshad, chairman of APTMA, warning that sectors like weaving now face the same pressures that have already affected spinning.

APTMA called for equal tax treatment of all yarn and fabric imports—cotton or polyester—by placing them on the EFS Negative List, and proposed imposing a 5% customs duty on imported yarn and 11% on imported fabric to promote domestic production.

The industry body also expressed concern over the elevated costs of producing polyester blends locally, citing a 35% cost disparity compared to imports. It pushed for the removal of sales tax on cottonseed and its byproducts, which are widely used as livestock feed, to safeguard cotton growers and avoid a shift toward water-intensive crops.

While acknowledging recent government reforms—including reductions in power tariffs, inflation, and interest rates—APTMA emphasized that unresolved issues in the EFS could undermine progress if not addressed comprehensively.

“Without resolving these distortions, the viability of the textile value chain remains in jeopardy,” the statement added.

The textile sector remains one of Pakistan’s largest employers and foreign exchange earners, and industry leaders are calling on the government to adopt a unified strategy to boost local value addition and long-term sustainability.