ISLAMABAD: All Pakistan Textile Mills Association (APTMA) has urged the government to urgently restore Export Facilitation Scheme (FFS) to its pre-Finance Act 2024 status, reinstating the zero-rating/sales tax exemption for local supplies meant for export manufacturing.
According to the Association, the Export Facilitation Scheme allows duty-free and sales tax-free import of inputs for export manufacturing. However, since the enactment of the Finance Act 2024, domestically sourced inputs for export manufacturing are subject to an 18 percent sales tax, which exporters can only claim back after a prolonged and resource-draining delay of over 6 months.
This policy has disrupted the entire textile value chain, forcing widespread closures, layoffs, and a shift away from domestic materials to imported inputs, jeopardizing the livelihoods of hundreds of thousands of workers.
“Domestic production, already burdened by high energy and operational costs, has become further uncompetitive against regional peers. Electricity and gas rates in Pakistan—at 14 cents/kWh and $12/MMBtu—are nearly double those in competing textile hubs such as Uzbekistan and China, where electricity is as low as 7-9 cents/kWh and gas is priced between $3.8-5/MMBtu,” said Kamran Arshad, Chairman APTMA.
He further contended that the policy shift has eliminated all incentives for exporters to procure from local suppliers, evident in the up to 700 percent surge in monthly yarn imports. At least 40 percent of the domestic spinning industry has been forced to close, leading to rampant job loss and insecurity in an industry that sustains millions of jobs.
He stated that the current policy threatens $10 billion in investments and endangers approximately one million jobs across the textile supply chain, including yarn, fabric, and value-added sectors. No country’s domestic industry can withstand and survive such fiscal discrimination in its own market.
APTMA has called on the government to urgently restore the Export Facilitation Scheme to its pre-Finance Act 2024 status, reinstating the zero-rating/sales tax exemption for local supplies meant for export manufacturing. This will provide a level playing field for domestic manufacturers, stimulate industrial growth, protect national employment, and promote domestic value addition in exports.
“We urge the government to act decisively to avert further industry setbacks and restore the textile sector’s vital role in Pakistan’s economic stability and growth,” APTMA Chief added.
Copyright Business Recorder, 2024