Sales tax on cotton may go temporarily

KARACHI (November 11 2003): The government is considering suspension of sales tax on cotton temporarily for a few months, it is learnt.

The sharp rise in cotton prices, which has compelled the textile mill-owners to seek help from the government, has made the manufacturers unable to compete in the international market.

A delegation of textile mill-owners met the commerce minister last week and discussed a number of proposals to help the mills out of the high-cost crisis.

Representatives of Federation of Pakistan Chambers of Commerce and Industry and All Pakistan Textile Mills Association have been demanding removal of sales tax on cotton.

Sources said that the decision on this issue is likely in a couple of weeks. However, the government made it clear that it would not accept the demand for zero duty on polyester staple fibre (PSF). There is 20 percent duty on PSF import, and removal of duty would arouse resistance from local producers of PSF, said sources. “The government might reduce the duty by 5 to 10 percent on import of PSF but there is no hope for zero-rated duty,” they added.

Reduction in duty on PSF would widely help the textile sector starved of raw cotton, as PSF is the best substitute for cotton.

Local cotton brokers said that lint prices are steady at Rs 3,350 to Rs 3,400 per maund and these rates might continue for another month.

The textile mill-owners say the price of Rs 3,400 is much higher than last year and it has raised the yarn prices by 25 percent, resulting in higher cost of finished products.

Karachi cotton market witnessed season's best trading on Tuesday on apprehension that prices might take unfavourable turn any time.

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