Pakistan’s textile and apparel exporters are raising the alarm over new amendments to the Export Facilitation Scheme (EFS), warning that the changes could severely damage the country’s export competitiveness. The Pakistan Textile Council (PTC) has voiced serious concerns over Statutory Regulatory Order (SRO) 1359(I)/2025 issued by the Federal Board of Revenue (FBR), stating that the new rules disregard the recommendations of a high-level committee and will inflict critical harm on a sector already facing immense pressure.
Key Raw Materials Excluded from EFS
The most contentious provision of the new SRO is the exclusion of essential raw materials—including cotton, cotton yarn, and grey cloth—from the EFS. These materials are the foundation of Pakistan’s textile value chain. Under the new rules, exporters will be required to pay import duties and sales tax upfront on these materials, a move the PTC has labeled a “tax on exports.” This is a reversal of the core principle of the EFS, which was designed to allow duty-free and tax-exempt import of inputs for export-oriented businesses.
Fawad Anwar, Chairman of the PTC, expressed his bewilderment at the FBR’s decision. “It is unfathomable that at a time when Pakistan is struggling to stabilize its economy and secure foreign exchange, the government would take steps that make it harder—not easier—for exporters to survive,” he stated.
Disregarding Recommendations of PM-Mandated Committee
The PTC’s criticism is particularly sharp because the amendments were notified despite the existence of a Prime Minister-mandated committee, chaired by Ahsan Iqbal, which was established to review the EFS in consultation with the private sector. The Council alleges that the FBR has “bulldozed” the recommendations of this committee, which were based on weeks of expert consultation and stakeholder consensus. According to the PTC, it was only agreed that a refundable GST might be imposed on high-count cotton yarn (43/s and above), not that these key raw materials would be completely excluded from the scheme.
Urgent Call for Reversal and Dialogue
In response, the PTC has submitted detailed objections to the Chairman of the FBR and has formally escalated the issue to the Prime Minister’s Office and several key federal ministers. The Council is urging the government to immediately withdraw the exclusion of cotton, yarn, and grey cloth from the EFS and reconsider other restrictive provisions.
The PTC’s objections also include a number of other provisions in the new SRO, such as:
- The input utilization period should be maintained at 18 months for all EFS users.
- Provisional authorization for new EFS users should be permitted based on their declared capacity.
- Bank guarantees should be replaced with less costly insurance guarantees.
- Restrictive conditions on toll manufacturing, including impractical 60-day limits, should be relaxed.
- Intrusive physical sampling rules should be reversed.
The Council emphasized that these changes are being implemented at a time when Pakistan’s textile exports are already facing global headwinds, including rising protectionism and new reciprocal duties from countries like the United States. The PTC concluded by strongly urging the government to intervene and suspend the amendments until a consensus-based revision can be undertaken in line with the recommendations of the PM-mandated committee.
