Business Recorder
ISLAMABAD: Pakistan’s leading textile bodies, including APTMA, PTEA, PHMA, PRGMEA and others, have jointly proposed a comprehensive set of policy reforms, warning that the sector is facing a severe competitiveness crisis due to high taxation, costly energy and liquidity constraints. According to Commerce Ministry, in a set of recommendations submitted to the government, the textile industry argued that the effective tax burden on exporters has surged to as high as 68.27 percent, significantly exceeding rates in competing countries such as India, Bangladesh and Vietnam. The industry maintained that multiple levies — including super tax, Workers’ Welfare Fund (WWF), Workers’ Profit Participation Fund (WPPF), and advance taxes — have eroded exporters’ margins and undermined their global competitiveness. It also expressed concern over the shift from the Final Tax Regime (FTR) to the Normal Tax Regime (NTR), stating that the move has adversely impacted export viability. Highlighting liquidity pressures, the stakeholders noted that advance income taxes and minimum turnover taxes are disproportionately burdening exporters compared to domestic-oriented manufacturers, further straining cash flows. To address these issues, the textile bodies have recommended reinstating the Final Tax Regime at 1 percent or allowing exporters the option to choose between FTR and NTR, along with reducing the corporate tax rate to 20 percent under the normal regime. They also called for abolition of super tax, advance tax and minimum turnover tax for exporters to restore liquidity and profitability. On the sales tax side, the industry termed the existing 18 percent GST regime as distortionary, proposing a reduced and progressive structure with 5 percent on raw materials and 10 percent on finished goods. It also demanded faster processing of refunds within 72 hours to ease working capital constraints. The stakeholders further highlighted that 35 to 40 percent of exporters’ working capital is currently blocked in pending refunds, including sales tax, income tax, and duty drawbacks, some of which have remained unpaid for over a decade. They urged the government to immediately clear all outstanding refunds and automate the rebate system. Energy costs were identified as another major challenge, with Pakistan’s electricity and gas tariffs significantly higher than regional competitors, coupled with supply disruptions that increase production costs and uncertainty. To improve competitiveness, the industry proposed a uniform electricity tariff of 8 cents per kWh, removal of surcharges, and a gas price of USD 7 per MMBtu for both industrial and captive use. The textile bodies also called for restoration of the Export Facilitation Scheme (EFS) to its original framework, arguing that recent changes have increased compliance burdens and liquidity pressures. In addition, they recommended reintroduction of the Duty Drawback of Taxes and Levies (DLTL) at 5 percent, along with a 2 percent performance-based incentive to promote export growth and offset higher input costs. Among other proposals, the industry urged reduction in duties on polyester staple fibre (PSF) to diversify exports towards higher-value man-made fibre products, revision of SME definitions, and rationalization of labour-related levies such as EOBI contributions. The textile sector emphasized that a stable, long-term policy framework spanning three to five years is critical to restoring investor confidence, boosting exports, and enabling sustainable industrial growth. Copyright Business Recorder, 2026
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