Following the government’s move to impose an 18% General Sales Tax (GST) on imported cotton and yarn in the amended Finance Bill 2025, Pakistani farmers and industry groups are calling for urgent tax relief on locally produced cotton and its by-products. The Pakistan Kissan Ittihad (PKI) has voiced strong opposition, warning that continued taxation on domestic cotton is crippling farmers already struggling with high production costs and dwindling profits.
PKI President Khalid Mahmood Khokhar argued that taxing local cotton unfairly penalizes growers and accelerates the decline of Pakistan’s cotton sector. Echoing this sentiment, Pakistan Business Forum (PBF) welcomed the GST on imports to protect domestic industry but criticized the failure to exempt local production. “Local spinners recover GST from farmers, effectively using them as withholding agents, which is unjust and unsustainable,” said PBF South Punjab Chairman Malik Talat Suhail.
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The statistics paint a dire picture: Pakistan’s cotton output has fallen from 14.8 million bales in 2011-12 to below 7.5 million in 2024-25, while imports have surged beyond 5 million bales. In dollar terms, cotton prices have plunged by 250% over the past decade due to currency depreciation, even as input costs — including fertilizers, diesel, and electricity — have soared by over 250–950%.
Farmers’ associations are now pushing for comprehensive reforms. PKI has proposed abolishing the 14% GST on tractors and the 18% GST on locally manufactured agricultural implements. They’re also urging removal of GST on “Khal Banaula,” a crucial cotton by-product used in livestock feed. Among other demands are the creation of a Commodity Price Commission to regulate pricing, a guaranteed 25% return on farm investments, and a flat electricity rate of Rs10 per unit for irrigation.
Both PKI and PBF stress that unchecked taxation and rising costs are pushing small and medium farmers to abandon cotton cultivation in favor of water-intensive crops — a shift that threatens Pakistan’s agricultural sustainability and water security.
