What tax does an exporter deduct when paying a unit for stitching, dyeing, printing, embroidery, washing, sizing or weaving?

Job-work units that stitch, dye, print, embroider, wash, size or weave for exporters sit in a separate withholding regime from ordinary service providers. The Income Tax Ordinance, 2001 gives these payments their own sub-section and their own rate.

What does the law say?

Section 153(2) requires every exporter or export house making a payment, in full or in part and including an advance, to a resident person for providing services of “stitching, dying, printing, embroidery, washing, sizing and weaving” to deduct tax at the time of payment. The tax is deducted from the gross amount payable, at the rate in Division IV of Part III of the First Schedule.

Clause (3) of that Division sets the rate for section 153(2) at 1.25 percent. The Finance Act, 2026 substituted 1.25 percent for the earlier 1 percent. The Ordinance is amended to 30 June 2026, so 1.25 percent is the rate for tax year 2027, covering payments from 1 July 2026 to 30 June 2027.

Section 153(7) lists “an exporter or an export house for the purpose of sub-section (2)” among the prescribed persons, which is how the exporter becomes a withholding agent for these payments.

Is the deduction final, adjustable or minimum tax?

Section 153(3) says tax deductible under sub-section (1) and sub-section (2) on the income of a resident person is minimum tax. The proviso that makes some section 153 deductions not minimum tax covers only clause (a) of sub-section (1), sale of goods by a manufacturer company or listed company, and clause (c) contracts by listed companies. Neither proviso mentions sub-section (2), so job-work payments from exporters stay minimum tax.

The Explanation to section 153(3) says the income of the resident person means the amount on which tax is deductible under sub-section (1) or (2). This page does not go further into how minimum tax interacts with the unit’s normal tax computation. That sits in other parts of the Ordinance.

How does it work in practice?

• Who deducts. Only an exporter or export house. A local brand or buying house that does not export is not covered by sub-section (2).
• Which services. The seven listed services: stitching, dyeing, printing, embroidery, washing, sizing and weaving. Other services fall outside sub-section (2).
• When. At the time the payment is made, including an advance payment.
• On what amount. The gross amount payable. Section 153(2) does not say whether that includes any sales tax on the service. Section 153(1), by contrast, says expressly “(including sales tax, if any)”. The corpus does not settle the point for sub-section (2).

Worked example (illustrative figures)

A dyeing and printing unit in Faisalabad processes fabric for an export house during October 2026. The export house pays Rs. 2,400,000 for the work.

1. Rate under clause (3) of Division IV of Part III for tax year 2027: 1.25 percent.
2. Tax deducted: Rs. 2,400,000 x 1.25 percent = Rs. 30,000.
3. Net paid to the dyeing unit: Rs. 2,400,000 - Rs. 30,000 = Rs. 2,370,000.

If the dyeing unit is not on the active taxpayers’ list, rule 1 of the Tenth Schedule increases the rate by one hundred percent of the specified rate:

4. Increased rate: 1.25 percent + 1.25 percent = 2.5 percent.
5. Tax deducted: Rs. 2,400,000 x 2.5 percent = Rs. 60,000.

What if the unit also sells its own goods to the exporter?

Section 153(2) covers only the listed services. If the same unit sells fabric it owns to the exporter, that is a sale of goods. Depending on the arrangement, a sale to an exporter may be taxed as an indirect export supply or as an ordinary sale of goods under section 153(1)(a). Those routes are explained on the related pages.

What if the payer is not an exporter?

A payment for the same stitching work by a prescribed person who is not an exporter or export house falls under section 153(1)(b) and the service rates in Division III of Part III of the First Schedule. Those rates are not covered on this page.

Common mistakes

• Treating the deduction as final tax. An older version of section 153 treated these deductions as final tax. The current section 153(3) makes them minimum tax.
• Using the old 1 percent rate. The Finance Act, 2026 raised the Division IV rate for section 153(2) to 1.25 percent for tax year 2027.
• Stretching the list. Section 153(2) names seven services. Services outside that list, such as packing or transport, are not covered by the sub-section.
• Forgetting the active taxpayers’ list. Rule 1 of the Tenth Schedule doubles the rate for a unit not appearing on the list.

What to check in the official text

• Section 153(2), 153(3) and its Explanation, and section 153(7)(i)(g) of the Income Tax Ordinance, 2001, as amended to 30 June 2026.
• Clause (3) of Division IV of Part III of the First Schedule, and its footnotes showing the Finance Act, 2026 change.
• Rule 1 of the Tenth Schedule for persons not appearing in the active taxpayers’ list.
• Provincial sales tax on services such as stitching or dyeing is a matter for provincial law and is outside this corpus.