Usman sponsored some posters for Kashmir Day, which had featured a derogatory line targeting the Hindu community. The posters were put up in public spaces in Lahore, the Pakistani media reported.
After a public backlash, Usman had blamed the printer who produced the posters for 'mistakenly' printing an inflammatory slur targeting followers of Hinduism.
Usman had said that he had wanted to target Indian Prime Minister Narendra Modi but the printer "mistakenly" substituted Modi's name with the word 'Hindu'.
"I apologise [to] all peaceful Hindus living on both sides of the border," Usman had said on Twitter.
"All posters [were] removed immediately when they came [to] my notice. I'm not the one who [is] stuck on mistakes," Usman tweeted after a Twitter user remarked that they did not believe his version.
In the show-cause notice to Usman after his suspension, the party has noted that the words that appeared on the posters violate party policy.
The notice was issued by the party's Lahore president, Zuhair Abbas Khokhar.
The matter has been referred to a special committee.