LAHORE
The Pakistan Carpet Manufacturers and Exporters Association (PCMEA) has submitted a set of proposals and demands for the federal budget for the fiscal year 2025-26, urging the government to address key challenges faced by the industry.
The association has called for a reduction in heavy duties, taxes, and restrictive measures imposed by the State Bank, which they claim are hindering the growth of handwoven carpet exports and putting Pakistan at a competitive disadvantage against global rivals like India.
PCMEA Patron-in-Chief Abdul Latif Malik, Chairman Mian Atiq-ur-Rehman, and Vice Chairman Riaz Ahmed emphasized that Pakistan’s handwoven carpet industry is one of the largest cottage industries in the country. Being 100% export-oriented, it plays a crucial role in the national economy by generating valuable foreign exchange.
The industry relies on raw materials being sent to Afghanistan for partial processing before returning to Pakistan for final value addition and export.
However, under Schedule 5 of the Customs Act 1990, a 25% sales tax on partially processed raw materials entering through the Torkham border has placed a severe financial strain on exporters, disrupting cash flow and working capital.
The association has proposed reducing this tax to a non-refundable 5% to ease financial pressure, support exporters, and improve trade facilitation.
They argue that this measure would not only stabilize the industry but also help Pakistan maintain its competitive standing in the global market.
Additionally, the association has expressed serious concerns over Circular EF02 (2023) issued by the State Bank of Pakistan, which imposes penalties on delayed export earnings.
The directive enforces a 3% penalty for delays of up to 30 days, 6% for delays of 31 to 60 days, and a substantial 9% for payments delayed beyond 60 days. PCMEA has urged the government to withdraw this policy, calling it an “unbearable financial burden” on exporters.
The association has also highlighted the frequent delays by private banks in processing incoming foreign payments, urging the government and the State Bank to take immediate action to ensure timely disbursement of export earnings.
Furthermore, PCMEA has called for duty exemptions under the 5th Schedule of the Sales Tax Act (SR 146), arguing that such a move would boost exports, increase foreign exchange inflows, reduce production costs, and enhance the industry’s global competitiveness. They also demanded that HS Code 5702 be included in the exemption list alongside HS Code 5701 to further support the sector.
To ensure effective coordination between the industry and federal agencies on budget-related matters, PCMEA has proposed the appointment of a dedicated representative as a focal person.
Expressing optimism, the association’s leadership urged the government to incorporate their proposals into the upcoming budget, stating that these measures would help alleviate financial pressures and support an industry vital to Pakistan’s economic growth and foreign exchange earnings.
