In a significant policy shift, the Federal Board of Revenue (FBR) has officially excluded cotton yarn, grey cloth, and raw cotton from the scope of the Export Facilitation Scheme (EFS), according to SRO.1435(I)/2025 issued on Tuesday.
Key Changes in the Revised EFS
The revised scheme, which replaces the earlier draft SRO.1359(I)/2025 issued on July 29, 2025, introduces the following updates:
•     Zero-rating facility withdrawn for cotton yarn, grey cloth, and raw cotton.
•     These items will now be subject to the standard sales tax regime.
•     Imports of these goods with bills of lading issued within 10 days of the notification will still qualify under the old EFS terms.
Scrap Imports & Copper Content Clarified
The revised EFS also outlines new rules for scrap imports:
•     Compressor scrap: Copper content allowed up to 8% by weight.
•     Motor scrap: Copper content allowed up to 10% by weight.
•     Remaining steel scrap will be taxed and can only be sold to sales tax-registered melters.
Insurance Guarantee & Material Acquisition
•     The term “insurance guarantee” now refers to guarantees issued by AA++ rated insurance companies, as notified by the Board.
•     Until the format is officially notified, bank guarantees will be required.
•     EFS users may acquire up to 10% new raw materials without prior approval from regulatory authorities.
Extension Clause for Exceptional Cases
In special circumstances, a committee comprising senior officials from the FBR, Ministry of Commerce, and Ministry of Industries and Production may grant an extension of up to nine months for material utilization, subject to documented justification.