ISLAMABAD – Major changes for export and manufacturing sectors, especially for textile and recycling industries, which rely heavily on imports.
Federal Board of Revenue (FBR) imposed 18 percent sales tax on import of raw cotton, cotton yarn, and grey cloth, removing these items from scope of Export Facilitation Scheme (EFS). The change was introduced through SRO and from now onwads, these raw materials, critical to Pakistan’s textile sector, will no longer benefit from the tax exemptions previously available under the EFS.
A temporary concession has been granted to imports backed by bills of lading issued within 10 days of the notification and will still qualify under the old rules.
It also updates the treatment of motor scrap and compressor scrap, allowing their import only for copper content, which has been capped at 10% and 8% by weight, respectively. The remaining steel scrap in these shipments will be subject to customs duties, sales tax, and withholding tax, and can only be sold to sales tax-registered steel melters.
FBR directed that until a formal format for insurance guarantees is notified, bank guarantees must be submitted by EFS users where applicable. Exports now acquire up to 10% additional raw materials beyond their authorized limit without prior approval from the Regulatory Collector or the coefficient body.
To address exceptional cases, a high-level committee has been authorized to grant up to a nine-month extension for material utilization, provided valid reasons are documented.
