Pakistan's yarn merchants say the sales tax on yarn and cloth is harmful. The budget has increased the sales tax on yarn and cloth to three and five per cent from two and three per cent.

Mills say the textile sector is already heavily burdened and imposition of an additional sales tax on yarn and cloth would crush this sector. Cheap yarn imports from India and cheap cloth exports from Russia are damaging the local markets and local industry is unable to compete because of rising input costs.

The country’s textile exports have been continuously sliding for the last 11 months by seven per cent. The textile sector earns more than 50 per cent of the foreign exchange for the country and provides employment to 40 per cent of the workforce.

Yarn and cloth are the base of the textile industry in Pakistan and these constitute the basic raw material for sizing, power looms, printing, processing, made-ups and garment sectors. The yarn and cloth sectors provide employment to a huge section of the workforce.

Additionally Pakistan’s textile sector is confronted with a huge energy crisis, which has led to a huge fall in the productivity of the industry.