ST, duty exemptions on imported cotton, yarn being withdrawn, Aurangzeb tells NA

Business Recorder

6 days ago

ISLAMABAD: Finance Minister Muhammad Aurangzeb informed the National Assembly on Monday that the government has decided to withdraw sales tax and duty exemptions on imported cotton and yarn to support local cotton farmers and revive the domestic textile industry.
In his winding-up speech on the debate on the Finance Bill 2024-25, he said the government had introduced an export facilitation scheme several years ago that allowed exporters to import raw materials duty- and tax-free to boost exports.
However, he added that data from the past three years revealed a significant price gap between imported cotton and yarn and locally produced goods, which negatively impacted cotton farmers.
Imported cotton yarn: APTMA hails 18pc sales tax imposition
By removing these exemptions, Aurangzeb said the move is aimed at increasing local cotton production, rejuvenating spinning mills, and conserving foreign exchange reserves.
He also announced Rs36 billion in additional tax measures for the fiscal year 2025-26 to compensate for revenue shortfalls caused by a reduction in sales tax on solar panels, while outlining a series of fiscal adjustments and social spending initiatives aimed at stabilising the economy and promoting inclusive growth.
He said the government had presented a 'balanced budget' focused on broadening the tax base, improving compliance, controlling expenditures, and enhancing transparency. 'To keep government spending in check and ensure fiscal responsibility, we have introduced new taxes amounting to just 0.25 per cent of GDP,' he said. 'Our emphasis remains on expanding the tax net rather than burdening existing taxpayers.'
He said key elements of the revised fiscal plan include measures to promote digitalisation, amend tax laws, and ease the tax burden on salaried individuals.
'We are facilitating the construction industry, introducing environmental tax reforms, and undertaking tariff rationalisation to lower business costs, curb smuggling, and boost exports…these reforms would be phased in gradually,' he added.
Aurangzeb said that efforts to revive the industrial sector are under way, adding an industrial policy will be announced soon, and the government is already holding consultations on an electric vehicle policy.
Among the far-reaching steps taken by the government, Aurangzeb highlighted a substantial increase in Benazir Income Support Programme (BISP) allocation – from Rs592 billion to Rs716 billion – benefiting nearly 10 million families. 'We want to empower recipients through skills development,' he said, noting the launch of Pakistan's first Skills Impact Bond with the British Asian Trust to provide results-based skills training.
The minister also announced a flagship agricultural initiative offering unsecured, digital loans of up to Rs1 million to smallholder farmers, covering inputs such as seeds, fertiliser, and diesel. An Electronic Warehouse Receipt System would also be introduced to help farmers store and sell their grain more effectively. In housing, he said the government would launch a 20-year affordable home financing scheme for low-income first-time buyers.
Aurangzeb also highlighted progress on women's financial inclusion, noting that Rs14 billion in loans have already been disbursed to 193,000 women under the Women Inclusive Finance Programme, with a similar amount planned for next year with support from the Asian Development Bank (ADB).
Aurangzeb outlined several revisions to the original budget, including a further reduction in income tax for salaried individuals. 'Initially, we reduced the tax rate on income up to Rs3.2 million annually. For income between Rs600,000 and Rs1.2 million, the tax was to be cut from five per cent to 2.5 per cent. On the Prime Minister Shehbaz Sharif's instructions, this has now been slashed to just one per cent,' he added.
Clarifying controversy over pension taxation, he said, 'Only individuals receiving over Rs10 million annually in pensions will be taxed. Pensioners over the age of 75 are fully exempt.'
The proposed 18 per cent sales tax on imported solar panels has also been revised. 'It has now been reduced to 10 per cent and will only apply to 46 per cent of components, translating into a modest 4.6 per cent price increase,' he said. He criticised 'opportunistic profiteering and hoarding' and warned that the government would take strict action against such practices.
He said amendments were also made to proposed changes in the powers of the Federal Board of Revenue (FBR). 'For cases below Rs50 million, arrests will now require a court warrant, and specific conditions must be met. Oversight will be ensured through a three-member FBR committee and mandatory presentation before a special judge within 24 hours,' he said.
He continued that most recommendations from the National Assembly's Finance Committee had been incorporated. One such change was a revised approach to taxing e-commerce, with micro and small enterprises being shifted to a simplified tax regime.
Responding to concerns over restrictions on economic transactions by non-filers, the minister said exemptions would apply to residential property purchases up to Rs50 million, commercial property up to Rs100 million, and vehicles up to Rs7 million. 'These limits may be revised later by the federal government,' he added.
The minister also warned of regional instability, citing the ongoing Iran-Israel conflict and its potential economic spill over effects. 'A special committee was formed by the prime minister on June 14 to monitor such developments and ensure a coordinated response,' he added.
In concluding remarks, he expressed gratitude to members of both houses of Parliament, committee chairs, and economic experts. 'I thank the Opposition leader Omar Ayub Khan, Saleem Mandviwalla, Naveed Qamar, and all members of the finance and revenue committees for their valuable suggestions, many of which have been incorporated,' he added. He also acknowledged the contributions of Prime Minister Sharif and Pakistan Muslim League-Nawaz (PML-N) supremo Nawaz Sharif and allied party leaders, saying 'their guidance was instrumental in formulating this budget.'
'National consensus is essential for economic recovery. Let us work together to build a brighter future for Pakistan,' he concluded.
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