Small weaving units with a handful of power looms are a feature of Lahore's older northern neighbourhoods and of towns around the city. Some weave fabric on their own account, buying yarn and selling cloth; others weave on job-work for larger traders who supply the yarn. Electricity is the biggest cost, and the textile sector's sales tax rules have changed many times.
Own-account vs job-weaving
| Model | Income | Main costs |
|---|---|---|
| Own-account weaving | Sale of fabric | Yarn, electricity, labour |
| Job-weaving (trader supplies yarn) | Weaving charges per metre | Electricity, labour, maintenance |
On job-work, the yarn and fabric aren't your stock — keep a record of yarn received and fabric delivered per trader.
Sales tax for weaving units
The textile sector has seen several sales tax regimes over the years — reduced rates, zero-rating for export-oriented chains, and special arrangements for small power looms, sometimes linked to the number of looms or electricity load. Which applies to you depends on your size, whether you weave for export or domestic markets, and the current law. We check your unit's position before you register or file.
Electricity
Looms run long hours on industrial or commercial connections. Electricity bills carry sales tax and advance income tax. If the connection is in your name and you file, the income tax is a credit. Electricity is also the clearest measure of your unit's activity — FBR knows this.
Labour
Loom operators are usually paid per shift or per metre woven. Keep a wage register. Once thresholds are met, EOBI and social security registration apply.
Yarn and fabric stock
For own-account weaving, track yarn bought, consumed and in stock, and fabric produced, sold and in stock. A plausible yarn-to-fabric yield supports your figures.
Machines
Looms are capital assets. Second-hand looms bought from other units should have a purchase note. Depreciate them over their life.
Job-weavers often have no paperwork from the trader. Ask for a monthly statement of yarn supplied and fabric received, with charges. It protects you in disputes and supports your income.
See exporter job-work for the garment side.
Buying yarn on credit
Weaving units often get yarn on credit from yarn merchants, paying after the cloth is sold. Amounts owed at 30 June are liabilities. Yarn merchants' statements should match your ledger.
Shad Bagh — questions we get asked
File without taking a day off
Our team works online from our Awan Town office, so you never have to visit or queue. Documents on WhatsApp, receipt back on WhatsApp.