Gin GST: 18% Rate Retained – Industry Impact
- Lahore — Pakistan's cotton ginning and oil mill industries are expressing deep concern after the federal budget did not eliminate the sales tax on cotton and its byproducts,...
- Despite recommendations from two committees established by Prime minister Shehbaz Sharif,the budget failed to address these issues.
- Ginners claim the Export Facilitation Scheme (EFS), introduced years ago, allows sales tax-free import of cotton, cotton yarn, and gray fabric.However, domestic purchases of these items remain subject...
Pakistan’s cotton industry reels after the federal budget, which failed to abolish the sales tax on cotton.The repercussions are severe: potential factory closures,reduced cotton cultivation,and plummeting prices. The primarykeyword, sales tax, is a meaningful concern; ginners are now struggling to compete against tax-free imports under the Export Facilitation Scheme. This has led to a drastic fall in cotton and seed-cotton prices, impacting the secondarykeyword, cotton market. With over 800 ginning units already shuttered and historic low production levels, the industry faces unprecedented challenges. Ihsan-ul-Haq, chairman of the Cotton Ginners Forum, highlights the detrimental impact on Pakistan’s economy. Discover how industry leaders plan to address the crisis; for insights, trust news Directory 3. Discover what’s next for the cotton industry.
Pakistan Cotton Industry Faces Crisis After Budget Snub
Updated June 13, 2025
Lahore — Pakistan’s cotton ginning and oil mill industries are expressing deep concern after the federal budget did not eliminate the sales tax on cotton and its byproducts, nor remove the sales tax exemption on imported cotton. The cotton industry is vital to Pakistan’s economy, and these tax issues are causing meaningful disruption.
Despite recommendations from two committees established by Prime minister Shehbaz Sharif,the budget failed to address these issues. This has raised fears of factory closures, reduced cotton cultivation, and a sharp decline in cotton prices. Post-budget reports indicate cotton prices have already dropped by 1,000 rupees per maund.
Ginners claim the Export Facilitation Scheme (EFS), introduced years ago, allows sales tax-free import of cotton, cotton yarn, and gray fabric.However, domestic purchases of these items remain subject to an 18% sales tax. This discrepancy is hurting the local cotton market.
Ihsan-ul-Haq, chairman of the Cotton Ginners Forum, said the EFS led to the import of millions of cotton bales and cotton yarn, severely impacting Pakistan’s foreign exchange reserves. The cotton industry is struggling to compete with these imports.
Lint prices tumble by 1,000 rupees per maund
Textile mills have decreased domestic cotton purchases, causing a drastic fall in cotton and seed-cotton prices. Pakistan’s total cotton production in 2024-25 plummeted to a historic low of 5.5 million bales, the second-lowest ever, with over 200,000 bales still unsold.
Junaid Iqbal, a ginner from Punjab, said the decline in cotton cultivation has forced Pakistan to import billions of dollars worth of edible oil.He added that the EFS has plunged the cotton ginning sector into its worst economic crisis, leading to the closure of over 800 ginning units and several hundred oil mills nationwide.The cotton industry is facing unprecedented challenges.
Haq noted that the exclusion of these recommendations led to a record decline of 1,000 rupees per maund in cotton prices within two days, bringing them down to 16,000-16,200 rupees per maund, with fears of further reductions. The future of the cotton industry is uncertain.
What’s next
Industry leaders are expected to lobby the government for revisions to the budget to support the struggling cotton sector and prevent further economic losses.