Cost and supply chain: Tax policy reshapes cotton economics
In mid-****, Islamabad imposed an ** per cent Goods and Services Tax (GST) on domestically produced cotton, yarn and grey cloth under the amended Export Facilitation Scheme, while imported cotton remained exempt, creating a clear cost advantage for foreign fibre. The United States Department of Agriculture (USDA)**;s Foreign Agricultural Service estimates Pakistan**;s ****/** cotton crop at just *.* million ***-lb bales, down from a peak of about **.* million bales in ****–**, and notes that significant production is going undeclared to avoid the tax. Pakistan Bureau of Statistics data show June **** textile exports fell to US$*.*** billion, down **.** per cent year-on-year and around ** per cent month-on-month, the lowest level in ** months.
Chart *: Pakistan**;s cotton production has fallen to nearly one-third of its peak
Source: USDA Foreign Agricultural Service, Pakistan: Cotton and Products Update (GAIN Report PK****–****, December ****).
