By Saleem Mubarak
The Pakistan textile industry taxes debate is intensifying as manufacturers warn that rising duties, delayed refunds and sudden new taxes are pushing businesses to the brink.
The textile industry is gasping for breath. With rising duties, delayed refunds and sudden new taxes, manufacturers are losing ground fast.
The real question now is—how far will businesses be pushed before they are forced to leave Punjab?
Infrastructure Development Cess Adds New Financial Pressure
Hazar Khan, former Senior Vice Chairman of the Pakistan Hosiery Manufacturers and Exporters Association (PHMA) North Zone, told Grand Lines that the government has imposed a 0.9 percent duty, called the “Infrastructure Development Cess” on imports. This means that whenever raw material is imported, we have to pay this extra duty, he said.
He explained that our imports are already a big burden for the industry, but they have to source raw material from abroad for two reasons. Sometimes, customers specifically require it from a particular country or supplier. Other times, it is because foreign raw material meets the required quality standards, whereas local material often does not, he remarked.
“Imported raw material is already expensive and now with almost one more percent added, it becomes even costlier,” he said.
Hazar Khan emphasized that even a one percent change is significant. The industry has repeatedly requested a two to three percent reduction in markup to survive, but instead, the government added another burden.
He warned that this decision would increase the cost of production.
“We are already 12 to 13 percent more expensive than our competitors and this new tax makes us even less competitive in the international market. Pricing has already become a serious problem,” he mentioned.
According to him, production is running at over 50 percent loss and the export industry as a whole is operating at a 50 percent minus level. This new tax will not only raise production costs further but also reduce exports and make pricing even harder, he added.
Rising Taxes Shrink Profit Margins for Manufacturers
He criticized the lack of consultation, saying decisions are being imposed as if the government expects us to pay for planes, roads, and other infrastructure. Taxes that already funded different projects are now considered insufficient, and the burden falls on the industry again.
“Our profit is almost gone because any small profit we make is taken away in taxes. We do not make more than three percent profit. Out of that, two percent is already deducted as withholding tax at source and after that, we also have to pay super tax.”
Heavy Dependence on Imported Raw Materials
He said that most imports come from China and Turkey, with China being the primary source.
“From China, we import yarn, polyester, fabric and accessories. While we also import yarn and cloth from Uzbekistan and Turkey, most of our textile-related imports come from China,” he added.
Textile Export Sector Warns of Long-Term Economic Impact
Ahmad Afzal Awan, Senior Vice Chairman of PHMA North Zone, told Grand Lines that the immediate impact may not be very visible right now, but in the long run, this is a very serious issue.
“We are already paying very high taxes. On top of that, we are paying almost one percent extra on export remittances, which we never paid before. At this time, our cost of doing business is the highest in the entire region.”
He explained that the real issue is the lack of any strong sector besides the textile sector. Instead of making this sector more specialized, more diverse, and more productive, we are continuously crushing it, he claimed.
“Now,” he said, “the infrastructure development cess will directly impact the people who send and receive goods and manage transport. After all, who handles the movement of goods? Around 80 to 90 percent are business people. Instead of supporting them, additional taxes are being imposed.”
“If Pakistan wants to improve its infrastructure, that does not mean the whole burden should fall on the business community. What kind of development is this?” he questioned.
Industry Fears Businesses May Shift Out of Punjab
He also highlighted that taxation has increased further, with sales tax refunds being delayed and export realization now carrying an additional one percent charge.
We have always paid one percent, but now that total has risen to 2.5 percent. Of this, one percent is advance tax and 0.5 percent are service charges. This creates a heavy burden and the most frustrating part is that no one has properly explained it to us.
If they wanted to implement this policy, they should have taken the stakeholders on board. Instead, the policy was created and enforced without consulting anyone from the relevant sectors. Around the world, when such policies are made, stakeholders are involved, consulted and their opinions are considered.
But that did not happen with us. One morning, we simply woke up to find that a circular had been issued. No one asked for our opinion, no one considered its implications and no one even thought about the potential after-effects, he noted.
This approach is extremely discouraging. Look across the region, you will not find this kind of taxation anywhere else.
“As a result, he said people will start moving their industries out of Punjab and Sindh to areas where such import taxes do not exist. Big business groups are already shifting to these models and others will likely follow to reduce their tax burden,” he said.
He said the government claims it will set up 150 industries in the province, but this cannot happen with a magic wand. Policies and taxation systems like these do not encourage growth, they create discouragement.
Author Profile
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Saleem Mubarak is an investigative journalist, passionate writer, and keen observer of everyday life. His work combines humor, realism, and social insight to bring everyday stories to life with depth and clarity.
With a distinctive storytelling style, he brings ordinary moments to life through sharp wit and thoughtful commentary.
His writing often explores cultural trends, civic issues, and human behavior, engaging readers with both intellect and emotion.
Whether tackling serious topics or adding a touch of satire, Saleem’s words reflect his deep understanding of society and his commitment to meaningful expression.
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