FBR slaps 18% sales tax on cotton imports

The Federal Board of Revenue (FBR) on Tuesday issued the delayed Statutory Regulatory Order (SRO) imposing an 18% sales tax on the import of cotton fibre, yarn, and grey cloth, following persistent requests from the All Pakistan Textile Mills Association (Aptma).

The Federal Board of Revenue (FBR) has issued SRO.1359(I)/2025 to propose important amendments in the Export Facilitation Scheme (EFS), aiming to tighten rules on certain imports. As per the new changes, import of motor scrap and compressor scrap will now only be allowed for copper content. The copper ratio has been fixed at 10% by weight for motor scrap and 8% for compressor scrap. Any leftover steel scrap from these items will face customs duty, sales tax, and withholding tax at the time of import. This steel can only be sold to sales tax-registered steel melters.

In another major change, raw cotton, cotton yarn, and grey cloth are now excluded from the EFS. However, shipments of these items with bills of lading dated within 10 days of this notification will still be allowed under the scheme. The FBR also clarified that until the insurance guarantee format is notified by the Board, users of the scheme will be required to submit a bank guarantee where needed.

Under the revised scheme, users will be allowed to import new raw materials up to 10% of their total authorization without needing prior approval from the Regulatory Collector or the Input/Output Coefficient Organization. Additionally, in special cases, a committee including senior officials from FBR, the Ministry of Commerce, and the Ministry of Industries may grant an extension of up to nine more months for utilizing the imported materials, if valid reasons are provided. These changes aim to improve control and transparency in the EFS while ensuring better compliance with import regulations.