FBR Excludes Cotton Yarn, Grey Cloth, and Raw Cotton from Export Facilitation Scheme

The Federal Board of Revenue (FBR) has issued a revised Export Facilitation Scheme (EFS) with major changes to exclude cotton yarn, grey cloth, and raw cotton from the scope of the scheme. The FBR has amended the Customs Rules through issuance of SRO.1435(I)/2025 here on Tuesday. The draft SRO.1359(I)/2025 was issued on July 29, 2025. The final notification has now been issued to notify the revised EFS. Under the SRO.1435(I)/2025, these three items have been excluded from the zero-rating facility under the EFS scheme, and therefore, cotton yarn, grey cloth, and raw cotton are now chargeable under the standard rate regime of sales tax. The revised scheme said that the import of compressor scrap and motor scrap shall be allowed for copper content only. The raw cotton, cotton yarn, and grey cloth falling under the respective headings of the Pakistan Customs Tariff shall be excluded from the scope of EFS. Provided that import consignments of raw cotton, cotton yarn, and grey cloth with bills of lading issued within ten days of the issuance of this notification shall he allowed under this scheme. According to the SRO.1435(I)/2025, under the revised EFS, the “insurance guarantee” means a guarantee issued by an insurance company duly notified by the Board, having a Pakistan Credit Rating Agency rating of AA++, on such format and conditions as prescribed by the Board. “Till the notification of the format of insurance guarantee by the Board, the EFS users shall be required to submit a bank guarantee, wherever applicable”, it said. Provided that EFS users shall be allowed to acquire new raw materials to the extent of 10% of the total authorization without requiring prior approval from the Regulatory Collector or the input-output coefficient organization. The copper content for motor scrap shall be allowed at a value of ten percent by weight, and for compressor scrap, 8 percent by weight. Customs duties, sales tax, and withholding tax shall be applicable at the import stage on the balance steel scrap component, which shall only be sold to sales tax-registered melters, the revised scheme said. In exceptional cases, a committee comprising senior officers from FBR, the Ministry of Commerce, and the Ministry of Industries and Production may grant a further extension in the utilization period up to nine more months for reasons to be recorded, the revised EFS added.