In a significant policy shift, the Federal Board of Revenue (FBR) has imposed an 18% sales tax on imports of raw cotton, cotton yarn, and grey cloth, effectively removing them from the scope of the Export Facilitation Scheme (EFS) through SRO.1359(I)/2025 issued on July 30.

What’s Changing:

• EFS Exit: These cotton inputs are no longer duty-free, tightening compliance for textile importers.
• Transitional Window: Imports with bills of lading dated within 10 days of notification will still qualify under previous EFS terms.
• Scrap Imports Restricted: Compressor and motor scrap permitted only for copper content—set at 10% and 8% by weight respectively.
• Guarantee Mandate: Users must provide bank guarantees until the insurance guarantee format is officially released.
• Flexibility Clause: EFS users may source up to 10% additional raw material without prior regulatory approval.
• Extended Utilization: In special cases, a committee may allow up to 9 months extension for material usage.

These reforms aim to create a level playing field for domestic manufacturers and streamline import compliance under Pakistan's evolving trade and industrial framework.