The move is aimed at generating revenue on the domestic sales of these products. On July 27, the FBR issued a sales tax notification by amending the SRO1125 of 2011 to introduce two different slabs on textile and leather product domestic sales.

Two per cent sales tax will be levied on un-finished products of textile and leather products; while in case of finished products of these sectors, the rate of sales tax will be 5%.

The first attempt to introduce tax on domestic sales of the five export oriented sectors was made in November 2011 by introducing two sales tax slabs (4% and 6%) on these five sectors.

On strong resistance, the government later introduced a uniform rate of 5% tax from January 1, 2012. In March 2013, the government reduced the rate of sales tax from 5 to 2% on supplies in the domestic market. Sales of textiles in the domestic market is estimated to be worth Rs300 billion (US$3 billion). The introduction of these two taxes will fetch substantial revenue.

The rate of sales tax for commercial importers on import of goods usable as industrial input will be taxed at the rate of 17% instead of the earlier 2%.