Pakistan proposes no VAT on textiles

In order to boost its growing textile sector, Pakistan's commerce ministry has promised to do away with value added tax (VAT) for textiles and make it zero from July 1 2016.

Federal commerce minister Khurram Dastgir Khan made the announcement at the 15th Textile Asia 2016 exhibition, an international B2B textile and machinery show, which took place in Karachi from March 9 to 11. While discussing the leading role of textile exports from Pakistan, Khan pointed to the fact that Pakistani readymade garment exports are currently "gaining momentum in the international market". Hence the move to abolish VAT to support this development further. In addition, prime minister Nawaz Sharif announced a reduction of the power tariff.

Textile Asia is the only South Asian textile trade fair approved by the Global Association of the Exhibition Industry (UFI), thus attracting participants from more than 45 countries, among them Austria, China, Czech Republic, France, Germany, India, Italy, Korea, Taiwan, Turkey, UK and USA. The fair's focus is on textiles, garments, embroidery, digital printing machinery and chemical and allied services.

A reduction of VAT on textiles from currently 15 percent to 0 should give Pakistan a competitive edge over other readymade garment-producing countries; in comparison, VAT on textiles is 15 percent in Bangladesh, 12.5 percent in India, 10 percent in Cambodia and 17 percent in China.

The textile and garment industry is Pakistan's largest manufacturing industry and after agriculture, employs the second largest number of skilled and unskilled workers, about 15 million people or roughly 30 percent of Pakistan's overall workforce. In Asia, the country is the 8th largest exporter of textiles and garments.

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