ISLAMABAD: The value-added textile and apparel industry has called on the government to reduce tax rates to enhance export competitiveness. This request was included in a series of recommendations presented to the finance ministry by the Pakistan Textile Exporter Association (PTEA) for consideration in the 2025-26 budget.
The value-added textile manufacturers emphasized the need to eliminate double taxation on the export sector, which has seen a decline in recent months, raising concerns among industry stakeholders. In the previous budget, the association highlighted that banks imposed a 1% advance tax on export proceeds, classified as a minimum tax rather than a final tax. Additionally, a 1% advance tax was introduced under section 147, sub-section (6C).
Meanwhile, local suppliers are required to pay a 1% advance tax on domestic textile supplies and 0.5% for yarn traders. The PTEA argued that this disparity in tax treatment is discriminatory and violates principles of fairness and natural justice.
The association has proposed reducing the advance tax on export proceeds to 1% to alleviate the financial strain on exporters. It also urged the government to reinstate the final tax regime for exporters and abolish the super tax.
The current Export Facilitation Scheme (EFS) ceiling, managed through EXIM Bank, is limited to Rs235 billion. The PTEA recommended increasing this limit gradually to at least Rs1.2 trillion to meet the sector’s capital needs. This expansion is seen as essential to achieving the target of boosting textile exports to $35 billion by 2030.
The PTEA also criticized the excessive protection granted to local polyester fiber manufacturers, which has reportedly caused significant losses to the value-added export sector. It called for the removal of such protections to ensure competitiveness and enable Pakistani exporters to access the global market for synthetic value-added garments, which are in high demand worldwide.
The association pointed out that aligning duty structures with those of regional competitors like Vietnam, China, and Türkiye would improve the value-added textile sector’s global competitiveness and attract synthetic garment exports.
To promote digital transactions, the PTEA suggested capping cash withdrawals at 10% of a company’s annual turnover from the previous year.
Additionally, the association proposed allowing back-to-back letters of credit (LCs) against master LCs, with a mandatory 35% value addition requirement, to facilitate value-added exports without the need for additional securities.
