Pakistan will impose a standard sales tax on cotton in the Budget 2015-16 with a view to generating about Rs 50 billion in revenue. Currently sales tax exemption is available on local cotton and a 5 per cent sales tax is applicable on the import of cotton. However, in the upcoming budget, the government has proposed imposition of sales tax on cotton.

The government has set a cotton target for the next season (2015-16) at 15.49 million bales against the revised target of 13.48 million bales for the outgoing season (2014-15). The government had set an initial target of 15.1 million bales for the current season (2014-15). However, later the target was revised three times to finally set at 13.48 million bales due to multiple issues including water shortage, rains/floods, and shortage of certified seed.

A notification grants exemption on import and supply of plant and machinery not manufactured locally subject to certain conditions. Sales tax was charged at a reduced rate of 5 per cent on such plant and machinery, subject to the same conditions.