Withdrawal of sales tax on Pakistan's cotton sector proposed

In a major move to rescue Pakistan’s struggling cotton sector, a high-level committee formed by Prime Minister Shehbaz Sharif has proposed the withdrawal of the 18% sales tax on local sales of cotton, cotton yarn, and grey fabric.

The recommendation came during a crucial meeting in Islamabad on Monday, where industry stakeholders raised alarms over an impending crisis.

The committee, led by Federal Finance Minister Muhammad Aurangzeb, Federal Planning Minister Ahsan Iqbal, and Federal Commerce Minister Jam Kamal, along with top bureaucrats, held urgent talks with key textile and ginning associations.

After intense discussions, all parties agreed that the tax was severely damaging the cotton value chain, paving the way for its potential removal to revive the sector.

According to Ehsan-ul-Haq, chairman of the Cotton Ginners Forum, the tax imposed on domestic purchases led to a sharp decline in local trade while spurring imports, putting the industry into economic turmoil. Cotton consumption overshadowed production, raising concerns about a record drop in cultivation this year.

A final decision on the proposal is expected in the coming days, pending approval from Prime Minister Sharif.

Industry representatives stressed that eliminating the tax could rejuvenate the cotton sector, reduce imports, and save billions in foreign exchange.

Dr. Jesumal, chairman of PCGA, underscored the importance of the move in boosting cotton cultivation and reducing edible oil imports.

The decision has sparked optimism among stakeholders, who believe the cotton industry’s revival will have far-reaching economic benefits for Pakistan.