Mixed bag for textiles sector in Pakistan’s budget
Pakistan’s parliament has passed the federal budget for 2023-2024 after the government made several changes, including fiscal tightening measures.
The revised budget - now amounting to Rs14.4 trillion (£39 billion) - aims for an additional Rs215 billion in tax revenue alongside a cutback of Rs85 billion in public spending for the upcoming fiscal year.
To promote the textile industry, a 5% regulatory duty is being abolished on synthetic filament yarn that is not produced locally.
However, the rate of goods and services tax (GST) on retailers of certain textiles and leather products has been increased from 12% to 15%.
Pakistan’s textile industry saw some relief when the State Bank of Pakistan withdrew restrictions on imports such as textiles machinery and some raw materials.
In pre-budget proposals, the All Pakistan Textile Mills Association (APTMA) urged the government to restore the regionally competitive energy tariff (RCET) regime. Textile exports increased 55%, from $12.5 billion to $19.5 billion during FY22, partly because of RCET, they said. No decision was taken in the approved budget.
Four associations - APTMA (Southern Zone), Pakistan Denim Manufacturers and Exporters Association (PDMEA), Jamshoro Chamber of Commerce & Industry and Lasbela Chamber of Commerce & Industry - urged the government of Sindh and Balochistan to save the export-oriented textile industry in the region from collapsing due to low pressure of gas. Curtailment of gas supply to the textile industry is leading to manufacturers closing.
Pakistan Textile Exporters Association (PTEA) demanded the restoration of the Zero-Rating Regime to allow exporters’ working capital to be unlocked.
Pakistan Hosiery Manufacturers & Exporters Association (PHMA) and Pakistan Ready Made Garments Manufacturers & Exporters Association (PRGMEA) asked the government to ensure early refunds of sales tax and duty drawback, and energy costs to be regionally competitive. They noted that Pakistan’s textile exports dipped by 30% in May 2023, whereas textile exports of Vietnam, Bangladesh and Sri Lanka increased by 20% to 30% in the same period.
