The Federal Board of Revenue (FBR) has announced a significant revision to the Export Facilitation Scheme (EFS), excluding key textile inputs — cotton yarn, grey cloth, and raw cotton — from the scheme’s zero-rating benefits. These changes were notified through SRO.1435(I)/2025, following a draft version issued on July 29, 2025.
Under the revised framework, these three textile items will now fall under the standard sales tax regime, marking a major policy shift for Pakistan’s export and textile sectors. Imports of compressor and motor scrap will only be permitted based on their copper content, specifically 10% by weight for motor scrap and 8% for compressor scrap. The remaining steel scrap component will be taxed and can only be sold to sales tax-registered melters.
Import consignments of cotton yarn, grey cloth, and raw cotton with bills of lading issued within ten days of the notification will still be eligible under the previous EFS rules.
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Another notable update is the formal definition of “insurance guarantee,” now required from AA++ rated insurance companies approved by the FBR. Until the official format is released, users must provide a bank guarantee where applicable.
Furthermore, EFS users are allowed to procure additional raw materials up to 10% of their total authorization without pre-approval from the Regulatory Collector or the Input-Output Coefficient Organization.
In special cases, a high-level committee comprising officials from the FBR, Ministry of Commerce, and Ministry of Industries and Production may grant a one-time extension of up to nine months for the utilization period of materials under the scheme.
