The All Pakistan Textile Mills Association has formally submitted a comprehensive set of budget proposals for the fiscal year 2026-27, calling for a significant overhaul of the current tax and tariff structure to prevent further decline in the country’s largest export sector. Highlighting a dire situation where more than 40 percent of spinning and weaving units have already ceased operations, the association is urging the government to prioritize liquidity and competitiveness. The proposals center on the abolition of the super tax, which the industry claims severely hampers the profitability of large taxpayers and discourages the very investment needed to modernize Pakistan’s industrial base.
A major point of contention for the textile sector is the minimum turnover tax, which currently stands at 1.25 percent. APTMA has proposed cutting this rate to 0.5 percent, pointing out that industry margins typically fluctuate between only 1 and 2 percent, making the current tax burden unsustainable. Furthermore, the association is advocating for a phased annual reduction of one percent in corporate income tax to bring Pakistan’s rates in line with regional competitors like India, Vietnam, and Bangladesh. By reducing the overall corporate tax burden and removing the requirement for advance income tax payments, the industry hopes to resolve the persistent cash flow constraints that prevent mills from fulfilling large international orders.
The industry is also calling for a return to a simplified fixed tax regime for exporters. Currently, textile manufacturers are burdened by a complex web of multiple taxes, including corporate tax, advance tax, and various federal and provincial levies like the Workers Welfare Fund and infrastructure cess. APTMA notes that exporters face more than 18 different taxes that collectively amount to between 7 and 11 percent of their total turnover. Restoration of a zero-rating status across the entire textile value chain and a gradual reduction of the sales tax from 18 percent to 15 percent are seen as essential steps to restore the liquidity necessary for day-to-day operations and long-term scaling.
Regarding trade policy and raw materials, the association has proposed significant changes to the Export Facilitation Scheme. APTMA has recommended excluding man-made fiber yarns and fabrics from the scheme, citing a worrying trend where local production has declined while imports reached 42 million kilograms in the latter half of 2025. To lower production costs for polyester, the industry is seeking a reduction in duties on pure terephthalic acid and the complete removal of anti-dumping duties on polyester staple fiber. These measures are designed to make local synthetic textiles more competitive against cheaper imports from various international markets.
To protect the remaining domestic manufacturing units, the association is proposing a tiered tax structure that applies lower rates on raw materials and intermediate goods while maintaining regulatory and anti-dumping duties on finished imported yarn and fabric. Additionally, APTMA is seeking zero-rating of customs duties on industrial spare parts and power plant components, which are vital for maintaining the efficiency of local factories. The association emphasizes that without these structural reforms and tax reliefs, the remaining operational units face immense financial pressure from rising input costs and unfair import competition, threatening the livelihoods of millions of workers connected to the textile value chain.
As the government prepares the upcoming federal budget, the demands of the textile industry present a significant challenge for fiscal managers who must balance the need for revenue with the necessity of industrial growth. The textile sector remains the backbone of Pakistan’s economy, contributing the lion’s share of foreign exchange earnings. APTMA’s proposals reflect a growing consensus within the business community that the current high-tax environment is counterproductive to the national goal of doubling exports. The outcome of these budget negotiations will likely determine the future viability of the textile sector and its ability to compete in the increasingly aggressive global market.
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