Lahore: The Pakistan Carpet Manufacturers and Exporters Association (PCMEA) has submitted a comprehensive set of proposals for the 2025-26 federal budget, urging the government to address significant challenges faced by the handwoven carpet industry. The association is advocating for reductions in taxes, duties, and restrictive measures imposed by the State Bank, which they argue are stifling growth and placing Pakistan at a disadvantage compared to global competitors such as India.

According to Pakistan Carpet Manufacturers and Exporters Association, the handwoven carpet industry is a major cottage industry in Pakistan and is entirely export-oriented, contributing substantially to the country’s foreign exchange reserves. The industry depends on raw materials sent to Afghanistan for partial processing before returning to Pakistan for final value addition and export.

The association has highlighted the financial burden imposed by a 25% sales tax on partially processed raw materials under Schedule 5 of the Customs Act 1990. This tax, applicable to materials entering through the Torkham border, has disrupted cash flow and working capital for exporters. PCMEA proposes reducing this tax to a non-refundable 5% to alleviate financial stress and bolster trade facilitation, thereby helping Pakistan sustain its global market competitiveness.

PCMEA has also voiced concerns about Circular EF02 (2023) from the State Bank, which penalizes delayed export earnings with escalating penalties. The association is calling for the withdrawal of this policy, describing it as a financial burden on exporters.

Frequent delays by private banks in processing foreign payments have also been a point of contention. PCMEA is urging the government and the State Bank to ensure timely disbursement of export earnings.

The association seeks duty exemptions under the 5th Schedule of the Sales Tax Act, arguing that such measures will enhance exports and reduce production costs. They also call for the inclusion of HS Code 5702 in the exemption list, alongside HS Code 5701.

To enhance coordination between the industry and federal agencies, PCMEA has proposed appointing a dedicated representative to act as a focal point for budget-related matters.

The association’s leadership is optimistic that their proposals will be considered in the upcoming budget, emphasizing that these measures are crucial for alleviating financial pressures and supporting an industry vital to Pakistan’s economic growth and foreign exchange earnings.