The All Pakistan Textile Mills Association (APTMA) has formally approached the Federal Board of Revenue (FBR), urging immediate intervention to address what it describes as widespread misdeclaration of grey cotton fabric under the Export Facilitation Scheme (EFS). The association has warned that continued misuse of the scheme is distorting market competition and placing domestic textile manufacturers at a structural disadvantage.
In a letter addressed to FBR Chairman Rashid Mahmood Langrial, APTMA Chairperson Kamran Arshad raised concerns that certain importers are misclassifying partially processed or greige fabric as “prepared for dyeing” (PFD). By doing so, these importers are allegedly availing tax exemptions under the EFS, despite the explicit exclusion of grey cloth, raw cotton, and cotton yarn from the scheme through SRO 1435(I)/2025 issued on August 5, 2025.
APTMA argues that this misdeclaration enables imported goods to enter the domestic market at zero-rated duties, while identical products manufactured locally are subject to 18 percent sales tax. The resulting tax disparity, the association states, creates an uneven playing field that undermines the competitiveness of Pakistan’s local weaving and textile units. According to the industry body, this imbalance is not only affecting margins but also threatening the sustainability of domestic production capacity.
The association noted that it initially raised the issue in December 2025, yet the matter remains unresolved. In its latest communication, APTMA has called on the FBR to remove all woven cotton fabrics falling under Chapter 52 of the Pakistan Customs Tariff from eligibility under the EFS. Such a step, it contends, would eliminate ambiguity in product classification and restore parity between imported and locally produced goods.
Beyond classification concerns, APTMA has also requested a comprehensive audit of companies participating in the EFS. The letter highlights allegations that imported inputs meant strictly for export-oriented production are being diverted into the domestic market, contrary to regulatory requirements. This practice, if left unchecked, could result in significant revenue leakage for the national exchequer while simultaneously eroding trust in the scheme’s governance framework.
Ensuring that imported inputs correspond directly to actual export volumes is critical to preserving the credibility of the EFS, the association emphasized. Without effective verification mechanisms and stricter enforcement, the scheme risks becoming vulnerable to systematic misuse. Industry stakeholders argue that digital tracking systems, enhanced customs scrutiny, and cross-verification of export documentation could help close regulatory gaps.
Kamran Arshad underscored that the issue extends beyond compliance technicalities. He stated that the matter directly impacts the survival of local weaving units, employment stability, and the broader competitiveness of Pakistan’s textile sector. The textile industry remains one of the country’s largest export earners and a major employer, making regulatory consistency and fair taxation central to its stability.
Industry analysts have echoed APTMA’s concerns, pointing out that misdeclaration of grey cotton fabric under the EFS has persisted, particularly following the withdrawal of zero-rating on local supplies in fiscal year 2024. They caution that unless the FBR strengthens monitoring protocols and undertakes systematic audits, domestic manufacturers may face mounting pressure from imports benefiting from regulatory loopholes.
The Export Facilitation Scheme was designed to streamline input imports for export-oriented industries by minimizing tax burdens and simplifying procedures. However, stakeholders argue that safeguarding the scheme’s intent requires tighter oversight and swift corrective action where misuse is detected.
As the debate intensifies, the spotlight remains on the FBR’s response and its capacity to balance facilitation with enforcement. For Pakistan’s textile ecosystem, the outcome will likely shape competitive dynamics and fiscal compliance standards in the months ahead.
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