In recent years, due to various reasons, the cotton planting area in Pakistan has been gradually reduced, resulting in a shortage of cotton production. Therefore, in order to meet the needs of Pakistan's textile industry and other fields, Pakistan will allow cotton to be imported tax-free.


Recently, the finance minister of Pakistan, at the meeting of the economic coordination committee, studied the export tax rebates of about 36 billion rupees, and allowed cotton to be duty-free, while requiring foreign currency to pay import duties on vehicles.


The textile industry is Pakistan's most important pillar industry and the largest export industry. In recent years, Pakistan's textile industry has been beset by bottlenecks, such as unsafe, high operating costs, declining competitiveness of products and weak demand in the international market.


In order to meet the needs of textile industry, ECC decided to exempt imported cotton from tariffs, surcharges and sales tax from February 1, 2019 to June 30th. This initiative is aimed at supporting the textile industry, especially the export sector, with adequate supply of cotton. According to relevant reports, Pakistan has been a net importer of cotton since 2001, and Pakistan's domestic cotton is mainly medium length and short staple. In order to transform high value-added products, local textile manufacturers need to import large quantities of high quality cotton to produce high count yarn products. In the past, cotton imports in Pakistan had been exempt from tax exemption, and the tax exemption policy was abolished in the 2014/15 fiscal year, with a 1% tariff and a 5% sales tax. The cotton import before tax exemption is subject to 3% tariff, 2% additional tax and 5% sales tax.