Pakistan textile industry association raises alarm over EFS misuse

The All Pakistan Textile Mills Association has raised concerns over the alleged misuse of the Export Facilitation Scheme (EFS), urging the government to take immediate corrective measures in a letter addressed to Minister of State for Finance Bilal Kiyani.

In the letter, APTMA said it had previously highlighted the issue during a technical committee meeting held on Feb. 26, where it pointed to what it described as “massive abuse” of the scheme through misdeclaration of imported fabric.

According to the association, importers are allegedly bringing in unprocessed or greige fabric under misleading and vague descriptions to bypass restrictions imposed under SRO 1359(I)/2025, which had removed such fabric from the scope of the scheme.

APTMA noted that despite this restriction, fabric imports under EFS have surged significantly. It shared data with the committee indicating a sharp increase in cotton fabric imports, prompting concerns among stakeholders.

While the committee acknowledged the issue and supported amendments to curb misuse, the association expressed regret that subsequent changes introduced through SRO 528(I)/2026 did not address the problem.

The group also cited earlier correspondence with the Federal Board of Revenue, highlighting a dramatic rise in imports of bleached cotton fabric under the scheme. Imports reached 1,911 tonnes in February, compared with just 23 tonnes in the same month last year — an increase of about 8,200%, according to the letter.

APTMA argued that the trend raises serious questions about the legitimacy of exemptions being claimed under EFS.

The association further said the scheme’s tax structure is placing domestic manufacturers at a disadvantage. While imports under EFS are exempt from sales tax, locally supplied inputs for export are still taxed, creating what APTMA described as an uneven playing field.

“There are strong indications that certain importers are misdeclaring unbleached fabric as bleached variants to exploit tax exemptions,” the letter stated, warning that such practices are leading to revenue losses and undermining fair competition.

APTMA urged the government to exclude additional categories, including semi-bleached, bleached, semi-finished and prepared-for-dyeing fabrics, from the scheme to prevent further misuse.

Calling the issue serious for both the domestic industry and national revenue, the association also requested a meeting with the minister to present its concerns in detail.