Textile industry slams EFS changes

Express Tribune

2 days ago

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The Pakistan Textile Council (PTC) has strongly criticised the Federal Board of Revenue's (FBR) recent amendments to the Export Facilitation Scheme (EFS), warning that the changes pose a direct threat to the survival of the country's textile and apparel exports.
PTC, which accounts for over 30% of the country's textile and apparel exports, has submitted a formal set of objections and recommendations to the FBR in response to SRO 1359(1)/2025 dated July 29, 2025. The PTC's submission, in line with the five-day window provided for feedback, strongly criticises the recent amendments to the EFS, warning that the changes could paralyse Pakistan's value-added export sector at a time of heightened global economic uncertainty.
It stressed that the EFS ensures competitiveness for textile and apparel exporters. However, the amendments have not only overlooked recommendations of a high-level government committee, led by Planning Minister Ahsan Iqbal, but have also introduced restrictive and impractical conditions that threaten the sector's survival.
One of the most damaging provisions, according to the PTC, is the exclusion of cotton, cotton yarn and grey cloth from the scope of the EFS. "This clause must be immediately withdrawn," the council stated, as it was never agreed that those materials would be excluded. At most, a refundable general sales tax (GST) on cotton yarn above a certain count was under discussion. "Their blanket removal from the scheme is unjustified and economically reckless."
PTC Chairman Fawad Anwar termed the move a "tax on exports," saying that it would impose a severe financial burden on exporters already grappling with global protectionism, rising input costs and new trade barriers, including the recently imposed reciprocal duties by the United States. "The timing could not be worse. Exporters are under stress and instead of supporting them, the government is pushing policies that increase costs and complicate operations," he said.
The PTC's policy note recommended that input utilisation period should remain at 18 months, with the possibility of a six-month extension by the regulatory authority. Any extension beyond that should be subject to approval by an FBR-appointed committee. Additionally, the council suggests that unused input materials should be allowed to be carried forward into the following year upon submission of a reconciliation statement.
The authorisation mechanism for input acquisition should be more flexible. For new EFS users, the regulatory authority may approve provisional authorisation up to 50% of the claimed production capacity, with the remainder granted upon capacity verification by the Input Output Coefficient Organisation (IOCO).
Furthermore, annual authorisation should be automatically triggered following submission of reconciliation statements via the Web Based One Customs (WeBOC) or Pakistan Single Window (PSW) system, subject to post-audit adjustments.
The council urged the FBR to shift from bank guarantees to insurance guarantees, noting that the latter would significantly reduce the compliance burden and financial stress for exporters.
It highlighted the operational impracticality of new vendor restrictions in toll manufacturing. Under the current amendment, goods sent for outside processing must be returned within 60 days, vendor details must be pre-recorded and any subsequent changes require prior collectorate approval. The PTC argued that these requirements are unnecessarily rigid and disrupt operational flexibility and negotiations with sub-contractors. It urged the removal of excessive data requirements, such as vehicle numbers, and called for the extension of toll manufacturing duration.
The council rejected the proposed rule mandating physical sampling to verify the utilisation of imported inputs. It called for the reinstatement of the original examination-marked sampling provisions, emphasising that the new rule would delay exports and create bottlenecks in the verification process. Finally, and most critically, the PTC demanded the immediate reversal of the exclusion of cotton, cotton yarn and grey cloth from the EFS. These materials are fundamental to the textile value chain and excluding them will force exporters to bear upfront import duties and taxes despite being net foreign exchange earners.