FBR Imposes 18% Sales Tax on Import of Cotton Products

The Federal Board of Revenue (FBR) has imposed 18 percent sales tax on the import of cotton yarn, grey cloth, and raw cotton and has excluded these items from the Export Facilitation Scheme (EFS). The FBR has issued an SRO.1359(I)/2025 to propose amendments in the Export Facilitation Scheme on Tuesday. According to the SRO.1359(I)/2025, under the revised EFS, 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 be allowed under this scheme. “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”, SRO.1359(I)/2025 said. Provided that EFS users shall be allowed to acquire new raw materials to the extent of 10 percent 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 10 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. 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 EFS added.