Amin Hashwani, Chairman of Karachi Cotton Association (KCA), has expressing concern over reports regarding a proposal to impose standard sales tax on cotton in Budget of 2015-16. This is expected to generate Rs 50 billion revenues. Hashwani said the KCA has traditionally opposed such proposals. In a statement, Hashwani stated that the proposal discourages production and inhibits the smooth flow of exports and runs counter to the policy of encouraging cotton trade in the country. The Pakistan government has set a target for cotton production 2015-16 season at 15.49 million bales. With this, there is a strong possibility for Pakistan to potentially export a million bales of raw cotton. Nearly 80 to 85 per cent of the cotton crop is exported in the form of raw cotton, cotton yarn, cotton fabrics, garments and cotton made-ups, and sales tax, if levied on raw cotton, would be refundable thereon at the export stage.

Cotton, being a highly priced commodity, is usually operated upon by exporters on narrow margins. They cannot afford to keep substantial borrowed amounts struck-up by way of payment and refund of sales tax for 6-7 months as was the case in the past. This would create serious liquidity problems for cotton exporters, and eventually cotton exports would adversely suffer. Keeping in view the importance of export of cotton and cotton products to the country’s economy, the Association strongly urged the authorities not to impose sales tax on raw cotton in the next budget.