Pakistan will withdraw sales tax and customs duty on imports of cotton. This is to encourage value addition, reduce the cost of doing business and bridge the gap between production and consumption. Pakistan has been a net cotton importer since 2001. The country produces short to medium staple length cotton which implies that long and extra long staple cotton has to be imported for production of finer yarn counts for subsequent transformation into high value added finished products.

Import of cotton remained duty free till the slab of zero per cent was abolished in 2014-15 and customs duty of one per cent was imposed along with a five per cent sales tax. Duties have an effect on the price of domestic cotton, resulting in an increase in the cost of doing business for the entire textile value chain, especially for the export oriented sector in highly competitive international markets.

The textile industry of Pakistan consumes around 12 to 15 million bales of cotton per annum. The cotton crop for the year 2017-18 is expected to increase 16 per cent compared to last year. The crop that’s arrived at ginning factories as of November 1, 2017, has increased 17 per cent compared to the same period last year.