Islamabad 30 July: The Federal Board of Revenue (FBR) has imposed an 18 percent sales tax on the import of raw cotton, cotton yarn, and grey cloth, and has officially removed these items from the Export Facilitation Scheme (EFS), according to a new regulatory notification.
The changes were outlined in SRO 1359(I)/2025, issued on Tuesday, which amends the current EFS structure. As per the notification, these textile inputs—previously eligible for tax-free import to support exporters—are now subject to regular taxes. However, shipments with bills of lading dated within ten days prior to the notification will still qualify under the previous EFS terms.
In addition, the FBR has revised rules for importing scrap materials. Only the copper content of motor scrap and compressor scrap will be permitted for import under the EFS, capped at 10 percent and 8 percent by weight, respectively. The remaining steel component will be taxed at the time of import and may only be sold to sales tax-registered steel melters.
Until further notice, EFS participants must submit a bank guarantee in place of an insurance guarantee wherever required.
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Furthermore, exporters using the EFS will now be allowed to acquire new raw materials up to 10 percent of their total approved quota without needing prior approval from regulatory authorities.
The policy changes are expected to raise input costs for textile exporters and may prompt industry groups to seek government reconsideration or relief.
