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The All Pakistan Textile Mills Association (APTMA) has raised serious concerns over loopholes in the Export Facilitation Scheme (EFS), claiming imported cotton fabric is undercutting local manufacturers. The association warned that continued misdeclaration of imports is creating unfair competition and threatening the survival of domestic textile units.
In letters to the Federal Board of Revenue (FBR), APTMA highlighted that, despite excluding raw cotton, cotton yarn, and grey fabric from EFS under SRO 1435(I)/2025, imports of woven cotton fabric under Chapter 52 of the Pakistan Customs Tariff are still entering through alternative descriptions such as “prepared for dyeing.”
The association said this practice allows imported fabric to remain zero-rated under the scheme, while locally produced fabric carries an 18 percent sales tax. This difference puts domestic spinning and weaving units at a significant disadvantage, weakening the local industry’s competitiveness.
APTMA first flagged the issue in December 2025, warning the FBR that grey cotton fabric continued to be imported under different labels despite its exclusion from the scheme. However, the misuse has persisted, the association added.
Importers have increasingly shifted to semi-processed and partially processed grey cotton fabric to bypass restrictions. This trend undermines the scheme’s intent and distorts fair competition in the local market. According to APTMA, the abuse has spread from yarn to fabric imports, threatening the viability of upstream textile units.
The association also noted that zero-rating on local supplies was removed in the FY2024 budget. Since then, misuse of the Export Facilitation Scheme has increased. In several cases, inputs imported under EFS were reportedly sold domestically, while exports were falsely recorded using goods made from locally sourced inputs, causing revenue losses for the government.
In its latest communication, APTMA formally urged the FBR to exclude all woven cotton fabric under Chapter 52 from EFS. The association also called for strict enforcement measures to prevent misdeclaration and ensure a level playing field for domestic manufacturers.
APTMA warned that timely corrective action is crucial to protect local manufacturing and prevent large-scale displacement of domestic producers by imported fabric.
