CHAPTER - 1 SALES TAX SUMMARY (348)

S.No. Description Importer Manufacturer/Dealer/Distributor/Wholes

Commercial Manufacturer aler/ Retailer
1 Registration Requirement Must Must (1) Manufacturer: Only if not a cottage
for registration industry. Cottage industry means a
(Sec-14) manufacturer whose turnover during last 12
months from all supplies does not exceed 8
million rupees, located in residential area
without having industrial connection and
does not have total labour force of more
than 10 workers.
Note-1 : To qualify as cottage industry all
above conditions must be fulfilled.
Note-2: Manufacture includes any process
of assembling, mixing, cutting, diluting,
bottling, packaging, repacking, engraving,
printing etc.
(2) Wholesaler, dealer, distributor:
Mandatory for every person
Note-1: Distributor means a person
appointed by manufacturer, importer or any
other person for specified area to purchase
goods from him for further supply.
Note-2: Term wholesaler includes a dealer
and means any person carrying on business
of buying and selling of goods by wholesale
for cash or deferred payment or commission
or stores such goods belonging to others as
agent for the purpose of sale and includes a
person supplying taxable goods to person
who deducts income tax at source.
(3) Retailer: Mandatory for retailers
mentioned in section 2(43A)- Tier-1
retailers (i.e.
(a). international or national chain of store
(b). operating in air conditioning mall or
plaza excluding Kiosks,
(c). whose cumulative electricity bill
during last 12M is Rs.1,200,000,
(d). wholesale-cum-retailer engaged in
bulk import and supply of consumer
goods
(e). a retailer who has acquired point of sale
for accepting payment through debit or
credit cards from banking companies or
any other digital payment service
provider authorized by SBP
(f). retailers of specified sectors, whose
deductible advance income tax u/s
236G and 236H on purchases from
importers, manufacturers, wholesalers
during last 12 months exceeds
Rs.100,000.
CHAPTER - 1 SALES TAX SUMMARY (349)

Rest of the retailers are not required to be

registered but they pay tax on their
electricity bill.
Note 1: The condition of minimum area of
1,000 sq.ft for registration as tier-1 retailer
has been removed through Finance Act,
2023.

Note 2: it is mandatory for every Tier-1

retailer to integrate their retail outlets
(including online website sales) with
Board’s computerized system for real time
reporting of sales. (Sec 3(9A))
Benefit of online integration
1. For supplies of finished fabric and
locally manufactured finished articles
of textile, textile made-ups and leather
through retail outlets, an additional
benefit of reduced rate @ 15% (instead
of standard 18%) on supplies is
available if they have maintained 4%
value addition during last 6 months. (8th
Sch S.no 66)
2. Normally input adjustment upto 90%of
output is allowed to all registered
persons. However, in case of
integration tier-1 retailers can adjust
input upto 95% of output. (SRO
344(I)/2020).

Note: Tax credit equal to lower of actual

amount invested or Rs.150,000 per
machiner u/s 64D of the Income Tax
Ordinance, 2001 is also available for
purchasing point of sale machine in order to
integrate with FBR system.
Consequences of Non-compliance
(a). No reduced rate of 15% for textile,
leather, textile-made retailers
(b). input tax will be reduced by 60% for all
including retailers of textile, leather
etc.(Sec 8(6)).
(c). A tier-1 retailer who fails to get himself
registered under the Act, and if
registered, fails to integrate in the
manner as required shall be charged
with following penalties:
CHAPTER - 1 SALES TAX SUMMARY (350)

Default Penalty (Rupees)

First default 500,000
Second default after 1,000,000
fifteen days of an
order of first default
Third default after 2,000,000
fifteen days of an
order of second
default
Fourth default 3,000,000
after fifteen days
of an order of third
default
Moreover, the business premises of the
taxpayer shall be liable to be sealed by
officer of inland revenue in addition to
imposition of penalty.
Furthermore, if taxpayer integrates his
system before imposition of penalty for
second default, penalty for first default
shall be waived by the commissioner.
(Sec 33, Sno. 25A)
(d). Moreover, any person, who is
integrated with the Board or its
computerized system, conducts such
transactions in a manner so as to avoid
monitoring, tracking reporting or
recording of such transactions or any
person who abets commissioning of
such offence shall pay a penalty of five
hundred thousand rupees or two
hundred per cent of the amount of tax
involved, whichever is higher. He shall,
further be liable, upon conviction by a
Special Judge, to simple imprisonment
upto two years or fine of two million
rupees, or with both.
Moreover, the business premises of the
taxpayer shall be liable to be sealed by
officer of inland revenue in addition to
imposition of penalty. (Sec 33, Sno. 24)
(e). Discontinuance of gas and electricity
connections by Board through general
order. (Sec 14AB)
CHAPTER - 1 SALES TAX SUMMARY (351)

4) Exporter: who intends to obtain refund

on zero rated supplies.
Note 1: Manufacturer-cum-exporter is a
person who owns or has his own
manufacturing facility to manufacture or
produce the goods exported or to be
exported.
Note 2: Commercial exporter means a
person registered as an exporter, who does
not have his own manufacturing facility and
is exporting the goods, whether in the same
state or after getting them processed or
manufactured from one or more registered
persons, and holds a valid sales tax invoice
for such processing, manufacturing or
conversion.
Note 1: A person liable to be registered but not actually registered shall not
be entitled to any benefit available to a registered person (input not allowable
in respect of unregistered period, however output is payable along with
default surcharge and penalty).
Note 2: No registration is required if importer, manufacturer, dealer,
distributor, wholesaler and retailer are dealing in exempt (6th schedule)
goods.
Note 3: Commissioner may compulsorily register a person who is liable to be
registered but fails to do so.
Note 4: If a person liable to be registered (e.g. manufacturer, dealer, retailer
etc.) fails to make an application for registration, he shall pay a penalty of Rs.
10,000 or 5% of the amount of tax involved whichever is higher. Moreover, if
he fails to get registered within 60 days of commencement of taxable activity,
be liable upon conviction by a special judge to imprisonment for a term which
may extend to 3 years or with fine which may extent to an amount equal to
amount of tax involved or with both. (Sec 33, Sno. 7)
Note 5: Board shall have power through sales tax general order to direct the
gas and electricity distribution companies for discontinuing the gas and
electricity connections of any person who fails to register for sales tax purpose
or any tier-1 retailer who does not integrate with Board’s computerized system
(Sec 14AB).
Discontinuance of Gas and FBR is empowered to discontinue the supply of gas and electricity to the
electricity connection (Sec-
following persons while notifying the gas and distribution companies:
14AB)
Persons Reasons
Any person including Tier-1 Fails to register for sales tax
retailer purpose
Registered tier 1 retailers Not integrated with FBR System
FBR shall restore their connections subsequent upon registration/integration.
Temporary 1. Temporary registration shall be allowed for 60 days to a person who files
registration application for sales tax registration as manufacturer without having
( Rule 5A) installed machinery for the purpose of import of machinery to be installed
by him.
2. post dated cheques equal to the differences in duties and taxes to be availed
as manufacturer shall be provided to custom authorities
3. A person temporary registered shall not issue a sales tax invoice and if such
invoice is issued, no input tax credit shall be admissible to buyer.
CHAPTER - 1 SALES TAX SUMMARY (352)

2 Time of supply (Sec (1) Earlier of (a) goods delivered (b) made available
2(44)) Note 1: Advance payment received is not taxable from July 2021.
However, any part payment received shall be accounted for in the return
for that tax period.
Note 2: However, any advance payment received in respect of services
is fully taxable under relevant provincial laws.
(2) Hire purchase: at the time agreement is entered into on full
amount.
(3) Services: at the time when services are provided.
Note 1: Any part payment received for exempt supply, shall be
accounted for in the return during which exemption is withdrawn.
Note 2 : In case of supply of sugar by a sugar mill to Trading Corporation
of Pakistan (TCP), if TCP does not remove the quantity of sugar
purchased from the mill premises and also does not make the payment
of sales tax amount involved to sugar mill, the issuance of sales tax
invoice by sugar mills may be deferred till the time of removal of sugar
by TCP. At the time of such removal or at the time of receipt of sales tax
amount involved whichever is earlier, the sugar mill shall issue the
invoice for sales tax and shall reflect the same in the return for relevant
tax period.
Note 3: In the event of removal of sugar by TCP for export purposes, the
mill will issue a zero-rated tax invoice subject to condition that TCP shall
provide a copy of export goods declaration to the sugar mill for its record.
3 Change in rate of tax (i) Tax rate will be on the date Tax rate will be used as is applicable
(Sec 5) on which goods declaration at the time of supply.
is presented.
(ii) If goods declaration Note 1: In case of hire purchase
presented in advance, then agreement, complete sales tax is
rate on the date on which charged at the time of agreement,
manifest of conveyance is hence there will be no impact in case
delivered will be applicable. of change in rate of tax.
Note 1: If tax not paid within 7
days of Goods Declaration (GD),
then rate on the date of payment
will be used.
Note 2: Sales tax input can be
claimed only to the extent of
sales tax paid to custom
authorities at the time of import
and reflected on GD.
CHAPTER - 1 SALES TAX SUMMARY (353)

4 Value of supply (2(46)) (a) Value determined under (a) Consideration in money which
the customs act including supplier receives provided in
custom duty + FED case consideration is:
Note: Sequence should be (i) in kind or partly in kind and partly
strictly followed. First add all in money, then FMV (E.g. Land
duties, then FED, then Sales tax Rs. 2.5 M, Rs. 75,000 cash
and lastly Income tax. whereas Mv of supply is 2.8. ST
(b) Value fix by board. If will be on 2.8M)
actual value of goods (ii) between associates/difficult to
imported is greater than ascertain- Higher of open
value fixed, actual value market price or actual
will be value of supply. (iii) General public on installment
(c) value of 3rd schedule inclusive of markup- Open
items imported by market price
commercial importer: Note: Markup shall also be excluded
Commercial importers of goods from credit sale (General Order
listed in Third Schedule will pay 3,2004)
sales tax at import stage on (b) Discounted price if invoice
‘retail price’ instead of custom shows price and discount as per
assessed value. The normal business practice.
commercial importers of 3rd
Note 1: discount should not be
Schedule items are not liable to
considered in the following cases.
pay value addition tax @ 3%.
Retail price should be printed on (i) case of early payment discount
each imported item. (ii) Third Schedule item
Note 1: If a Person being a (iii) If discount allowed is in excess
manufacturer/importer of an item of industry norm, then it will be
subject to tax on retail price and allowed upto industry average
fails to print the retail price, a only.
penalty of ten thousand rupees (iv) A non-register person cannot
or five per cent of the amount of issue tax invoice, therefore, any
tax involved, whichever is higher discount given should not be
will be charged. considered for withholding tax
Further, such goods shall also calculation @ 5% (5/118) on
be liable to confiscation. value.
However, the adjudication Note 2: Any subsidy provided by
authority, after such any person shall not be deducted
confiscation, may allow from sale price while calculating
redemption of such goods on value of supply except in case of
payment of fine which shall not subsidy provided by Government
be less than twenty percent of to electricity /natural gas including
the total retail price of such RLNG consumers.
goods. (Sec 32, Sno. 26)
(c) Third Sch items- Retail price. (In
Note 2: if it is not possible to print case of more than one price for
the retail price at import, the a particular brand, highest price
import shall undertake to print will be retail price).
the retail price after clearance of Note: Retail price mechanism also
goods and shall pay sales tax on applicable on imported 3rd sch item.
retail price which shall not be
(d) reasons to believe that value is
less than 130% of the custom
value increased by all duties and under declared then value
taxes. (Sales tax general order determined by the valuation
committee consisting of FBR
no. 103/2019).
and trade association.
CHAPTER - 1 SALES TAX SUMMARY (354)

Note 3: if more than one price is (e) Toll manufacturing- Actual

fixed for the same brand, the consideration received by the
highest of such price shall be manufacturer for the value
used for chargeability of sales addition carried out in relation to
tax. such goods (Conversion
Note 4: if the phrase “in retail charges)
packing appears against any (f) Electricity supplied by
item/entry in 3rd schedule, the independent power producers
retail price taxation shall not (IPPs) or WAPDA- value of
apply If such items are not in supply is amount received on
retail packing at the time of account of energy purchase
import. price only. Any other amount
received on account of capacity
purchase price, bonus,
supplementary charges, energy
price premium, Late payment
surcharge shall not be included
in value.
Note: Capacity purchase price is not
considered supply, hence there will
be no apportionment of fuel input on
this.
(g) supply of electric power and gas
by distribution company-total
amount billed for electricity and
natural gas including charges,
rents, commissions and all local
federal and provincial taxes but
excluding amount of late
payment surcharge.
(h) value fix by board. If actual value
is greater than value fixed then
actual value will be value of
supply.
(I) if a person is engaged in
purchasing used vehicles from
general public on which sales tax
has been paid at time of import or
manufacturing and now it is sold
in the open market after making
certain value addition i.e; not in
the same condition as when
imported or manufactured, the
value of supply will be the
difference between sale and
purchase price of the said vehicle
on the basis of valuation method
prescribed by Board.
CHAPTER - 1 SALES TAX SUMMARY (355)

According to the FBR, where a

registered person is engaged in the
business of purchasing and selling
used vehicles from the general
public on which sales tax had
already been paid at the time of
import or manufacturing, the value of
the supply shall be worked as A-B.
Where 'A' is the consideration in
money, including all charges and
fees but excluding the amount of
sales tax charged, received by the
registered person from the buyer of
the used vehicle.
'B' is the consideration in money,
including all charges and fees, paid
by the registered person to the seller
of the used vehicle. Provided, that
the whole amount paid or received
against the above-mentioned
transactions is made through
banking channel as required under
Section 73 of the Sales Tax Act.
Provided further that in case, a
vehicle is sold at a price lower than
its purchase price, the value
determined under this sub-rule shall
be deemed to be zero.
No input tax credit shall be allowed
to the registered person, which is
attributable to any goods or services
acquired for the purposes of selling
used vehicles.
Note: This levy will not be applicable
on commission based model.
5 Input Definition Tax levied on (a)supply of goods to person (b) import of goods by person (c)
Tax (Sec 2(14) goods and services in sales tax mode under FED Act, 2005. (d) services
under provincial sales tax acts on services rendered to person (f) levied under
sales tax act, 1990 as adapted in Azad Jammu and Kashmir on supply of
goods received by person.
Note: Input against invoices issued by persons registered under sales tax
law of AJK shall be available only if such AJK registered persons are enrolled
with Board’s computerized system and are also on the active taxpayer’s list
maintained by AJK sales tax authorities.
Rate (S-3) 18% 18% Purchases from registered person:
18%
Purchases from non-registered
person: Nil

3% value
addition
(see note) 3% value addition
CHAPTER - 1 SALES TAX SUMMARY (356)

Twelth Value addition tax not payable by: Note: No input will be charged on
(12th) (a) raw material and intermediary purchase of exempt goods from
Schedule goods imported by manufacturer registered person.
for in house consumption
excluding compressor scrap,
motor scrap and copper cable
cutting scrap.
(aa) plant, machinery and equipment
falling in chapter 84 and 85 of first
schedule to the custom act as are
imported by manufacturer for in
house installation/use
Note: value addition tax will be
charged on machinery not falling in
chp 84/85 of custom act.
(b) Petroleum Products by oil
marketing companies for sale in
Pakistan.
(c) Registered service providers
importing goods for own use
(d) RLNG/LNG
(e) Second hand and worn clothing
or footwear
(f) Gold and silver in unworked
condition
(g) Cellular mobile phone or satellite
phones
(h) Goods specified in 3rd schedule
on which input tax is paid on retail
price basis.
(i) Electric vehicles (4 wheelers)
CKD kits/CBU, and small
cars/SUVs, with restricted battery
(j) Electric vehicles (2-3 wheelers
and heavy commercial vehicles)
in CBU condition till 30th June,
2025
(k) motor cars of cylinder capacity
upto 850cc
Note 1: value addition tax also to be
charged on 8th schedule items.
Note 2: value addition tax will form
part of input tax and will be deducted
from output tax.it cannot be refunded.
it can only be carried forward for
adjustment against output of
subsequent period. However, refund
of 3% value addition tax shall not be
barred if paid on goods used in making
zero-rated supplies.
CHAPTER - 1 SALES TAX SUMMARY (357)

Conditions Import: bill of entry in his name (a) Taxable supply: Holds tax
for showing registration number. invoice in his name bearing his
claiming registration number.
input tax Note: Sales tax on imports is
(Sec 7) claimable on paid basis only to the Note: it is mandatory for all
extent of sales tax paid and shown in importers, manufacturers,
goods declaration. wholesalers, dealers,
distributors, wholesale-cum
retailers of FMCG goods to
issue electronic tax invoice.
Physical invoice issuance is
not allowed.
(b) Auction purchase: Holds
treasury challan in his name
bearing registration number
showing payment of sales tax
(c) electricity and gas bill- if it
reflects the customer's
registration number and
address where connection is
installed. Input is not allowed
in respect of supply of
electricity and gas to labour
residential colonies.
Note 1: Input tax can be claimed for
any of six succeeding tax periods if
not claimed in relevant tax return.
Input on electricity/gas bill is
claimable on paid basis
Note 2: A person who fails, to
issue an invoice when required
under Act or make payment as
prescribed in section 73, shall be
liable to pay penalty of Rs.5,000 or
3% of the amount of tax involved
whichever is higher.
CHAPTER - 1 SALES TAX SUMMARY (358)

Condonatio
Where any time or period has been specified under any provisions of sales
n of time
tax act within which any act is to be done, the Board may “at any time before
limit
or after the expiry of such time or period” permit such act to be done beyond
(S-74)
the time limit prescribed in sales tax law. Board may by notification in official
gazette empower any Commissioner to exercise Board power.
Through sales tax general order no.2 dated 27 May 2004 FBR has prescribed
the following mechanism to claim input tax beyond 6 months’ period:
(i) the tax invoice or bill of entry on which input tax is claimed is genuine, in
the name of taxpayer, and contains all details specified in section 23 of
the Sales Tax Act, 1990;
(ii) no input tax adjustment was earlier taken on the same tax invoice or bill
of entry;
(iii) payment in respect of the tax invoice was made in terms of section 73 of
the Sales Tax Act, 1990; and
(iv) supplier has declared such supply in his return and has paid the amount
of tax due as indicated in his return

Similarly, through sales tax general order no. 1 dated 20 April 2004 fbr has
prescribed following procedure to claim sales tax input even if payment is not
made within 180 days as per section 73.

(i) the payment has been verifiably transferred through banking channels
from the business account of the buyer to the business account of the
seller.
(ii) the invoice relating to the transaction contains the full and correct name,
address and registration number of both the supplier and the buyer
besides other particulars specified in section 23 of the Act;
(iii) the amount of tax involved has been paid;
(iv) the transaction does not involve any closed, de-registered or
blacklisted/suspended registration person;
(v) no case of tax fraud has been made out against the buyer or the seller;
and
(vi) in case the delay is more than 60 days (beyond the prescribed period of
180 days specified in section 73), the Collector of Sales Tax concerned
is satisfied that the delay is genuine and due to circumstances beyond
the control of the applicant.

opening Can be claimed in case application for Can be claimed in case registration
stock registration is made within 90 days and application is made within 30 days,
(S-59) person holds valid bill of entry and purchases are from registered
stock is unsold and verifiable. person and you hold valid tax
N-1: Sales tax would have been invoice and stock is unsold and
charged @ 21% (18%+3%) in this verifiable.
case.
CHAPTER - 1 SALES TAX SUMMARY (359)

Inadmissible (1) Payment > 50,000 (other than

transactions utilities) must be through
(S-73) banking channel.
(2) Payment must be made from
business bank account of
buyer to business bank
account of the supplier. Bank
account of both buyer and
supplier should be declared to
Board at the time of
registration/through change of
particulars subsequently.
(3) Payment must be made within
180 days of issuance of tax
invoice in case of credit
transactions. (Board may
extend time through
condonation u/s 74)
(4) adjustments made by a
registered person in respect of
amounts payable and
receivable to and from the
same party shall be treated as
payments subject to following
conditions, namely:
(i). sales tax has been charged and
paid by both parties
(ii). the registered person has
sought prior approval of the
Commissioner before making
such adjustments.
If any of the above conditions are
not fulfilled then:
(a) Buyer will not be entitled to
claim input tax/refund/zero
rating/duty drawback
(b) Supplier will not be entitled to
claim input tax/refund/zero
rating/drawback if amount not
received in bank account.
Note 1: Input tax should be
reversed in the month after lapse of
180 days.
Note 2: Sec 73 not applicable on
registered person supplying goods
to unregistered person. However,
supplier should deposit cash in his
business bank account to claim
input tax. Also not applicable on
goods received in kind payment
provided they are taxable goods
and any balance payment even if it
is less than Rs.50,000 is made
through banking channel.
CHAPTER - 1 SALES TAX SUMMARY (360)

Restriction (1) A register person shall make all

on input on taxable supplies to a person who
supplies to has obtained sales tax
unregistered registration number. However,
persons (Sec supplies upto:
73(4),Sec  Rs. 10 million per person per
23, Sec 8) month
 Rs.100 million per person in a
financial year
Can be made to unregistered
persons.
(2) In case of non-compliance the
supplier shall not be entitled to
claim input tax attributable to
such excess supplies to
unregistered persons.
Similarly, expense will be
disallowed proportionate to total
turnover in income tax.
(3) Further FBR has clarified vide
STGO 01 of 2020 dated
16.01.2020 that above
provisions shall not apply to
supplies made to:
 Federal/provincial/local
Government departments,
authorities, etc. not engaged in
making of taxable supplies’
 Foreign Missions, diplomats and
privileged persons.
 Registered persons engaged in
manufacturing and supply of
fertilizer upon submission of
required documents.
 All other persons not engaged in
supply of taxable goods.
(4) Similarly, as per section 23 read
with section 8, any tax invoice
issued shall bear the CNIC/NTN
number in case supplies are
made by manufacturer or
importer to unregistered
distributor. In case of non-
compliance input tax attributable
to supplies made to unregistered
person on pro-rata basis is
disallowed.
However, there is no condition of
CNIC in case payment is made
through debit/credit card or
digital mode.
Note 1: There is apparently an
overlapping or duplication in the
disallowance of input tax under
sections 8 & 73 in certain situations
where supplies are made to
unregistered persons.
CHAPTER - 1 SALES TAX SUMMARY (361)

Tax credit (a) Goods/services used other than for taxable supplies (including
not allowed exempt)
(S-8) Note-1: Input allowed on wastage of RM during manufacturing (Cir 1,
1989), however Board may impose restrictions under Rule 25A-25K of
the Sales Tax Rules, 2006 on wastage of material on which input tax
has been claimed. Similarly input allowed on loss of goods in transit.
However, it is not allowed on expired goods.
Note-2: Input tax on goods subsequently destroyed (e.g. fire etc.) is
not allowed. Further any insurance claim received (without
surrendering the right of goods) is also not supply hence not taxable.
Input also not allowed on stores written off.
(b) Goods subject to extra tax under section 3(5). Only extra tax paid is
disallowed.
Note: Under SRO 1222(I)/2021 extra tax is charged @ 18% on
unregistered industrial consumers and 5%-18% on unregistered
commercial consumers on supply of electricity and natural gas.
(c) fake invoices, discrepancy by CREST, import/purchase of Agriculture
machinery/equipment @ 7% under 8th Sch, ST not deposited by
supplier
(d) Services on which input tax adjustment is barred under provincial law
(Services at reduced rate or under reverse charge mode are barred in
provincial laws)
Note: input is allowed on reduced rate services in Islamabad and
services subject to rate of 15% (transport services) in Punjab.
(e) Goods used/permanently attached to immoveable property such as
construct materials, paints, sanitary fittings, pipes, wires, cables
Exclusions: 1. Pre-fabricated building 2. Above goods acquired for
direct use in production 3. Above goods acquired for sale/resale.
(f) Vehicles, vehicle parts, furniture, furnishings, electric and gas
appliances, office equipment.
Exclusions: 1. Fork lifter 2. electronic cash register 3. Above goods
acquired for sale/resale.
(g) Purchases from person whose registration is suspended or blacklisted
by Commissioner.
Note: In case of suspension input from date of suspension is not
allowed. But in case of blacklisting input against invoices even prior to
blacklisting is also disallowed.
(h) Foods, Beverages, garments and consumption on entertainment,
gifts/give aways purchased for customers etc., crockery, cutlery
(i) The input goods or services attributable to supplies made by
manufacturer or importer to unregistered distributor on pro-rata basis
for which sale invoices do not bear the NIC/NTN of unregistered
distributor.
Note: NIC/NTN not required in case of payment through debit or credit
card or digital mode.
(j) Give aways including diaries/calendars, supply of electricity to
residential colonies
(k) Purchases from registered but non-active tax payer or person
temporarily registered.
CHAPTER - 1 SALES TAX SUMMARY (362)

Note 1: A person can become non-active if (1) his registration is

suspended/ he is blacklisted, (2) fails to file sales tax return for two
consecutive months, (3) fails to file income tax return by due date (4)
fails to file annual withholding statement or two consecutive quarterly
withholding statements.
Note 2: In case of purchases from non-active registered person, sales
tax @ 5% of the value should be withheld.
(l) Goods/services which at time of filing return have not been declared
by supplier in his return or he has not paid due amount of tax.
Note 1: Provisional adjustment is allowed in current month only if
supplier declare said amount in his return (annexure C) by 10th day of
next month.
(m) Purchases made by person who fails to furnish required information to
tax department.

Apportionment No Residual Input tax on goods used for both taxable

of input tax apportion input tax (including zero rated) and exempt supplies is
(Rule 25) ment x value called residual input tax which is apportioned
required of as:
as goods taxable
Residual input tax x value of taxable
are in supplies/
supplies/ value of taxable + exempt supplies
finished value of
form. taxable Note 1: Brought forward input tax should not
However, + be used for apportionment as it’s already
if certain exempt apportioned. However, it will be apportioned
portion of supplies in case of sales to unregistered person
finished without CNIC
goods
Note 2: There would be no apportionment in
sold are
zero case of trading in any finished goods as input
rated/ and output is identifiable wrt finished goods.
However input will be apportioned if some of
exempt,
the purchased goods are locally sold and
then
remaining portion is exported/exempt.
apportion
ment will Note 3: Sales return figure and purchase
be return figure shall be taken into account in
required. sales/purchase value while apportioning
residual input tax.
Note 4: Input not claimed previously but
claimed in this month due to six month time
limit, input tax on services, packing material
and fixed assets shall also be taken into
account in residual input tax figure while
apportioning.
Note 5: Monthly adjustment-provisional,
Final adjustment at end of each financial
year.
Note 6: input will also has to be apportioned
on zero rated goods as same is not allowed
to be adjusted and only refund is allowed.
CHAPTER - 1 SALES TAX SUMMARY (363)

Drawback Definition of duty drawback: A refund that can be obtained when

allowable on re- an import tax (custom duty, sales tax, other duties etc.) has already
export (Sec- been paid for a good, but the good is then subsequently exported.
62,63) (a) Goods which have been imported into Pakistan on which tax has
been paid on importation are re-exported outside Pakistan and such
goods are capable of being identified, 7/8 of such tax be repaid as
drawback.

(b) Goods must be re-exported within 2 years of import. Board may

extend for further 1 year.

(c) repayment of sales tax as drawback in respect of goods which

have been taken into use between importation and re-exportation
shall be subject to such order, conditions or limitations as may be
imposed by Board.
Purchase return (a) Allowed. However, any adjustment of
(Sec 9, Rule decrease in output or increase in input can
19-23) only be allowed if goods are returned within
180 days along with relevant debit/credit note
to be issued by both parties.
(b) 180 days rule is not applicable if it results
in increase of output tax or decrease of input
tax.
(c) In case of supply of electricity or natural
gas by distribution companies leading to
change in amount of tax, such company may
instead of issuing separate debit/credit note,
make necessary adjustment in the bill for
subsequent month ensuring that due sales
tax is paid on actual value of supply.
Registered buyer shall not claim input tax
credit in excess of sales tax amount actually
paid against such bills.
Note-1: Goods returned if unfit for sale
(expired goods) should be destroyed in
presence of sales tax officer and input tax is
not admissible on such goods.
Note-2: If you are supplier: Sales return:
credit note, increase in sale value: Debit note
If you are customer: Purchase return: Debit
note, Increase in purchase value: credit note.
Input can be claimed only if related
debit/credit note is issued by both parties.
However, in case of perishable food items,
corresponding credit note may be issued
within 15 days of return of such goods.
Note-3: corresponding debit/credit note will
not be required in case sale is made to
unregistered person.
Note-4: 4% further tax shall not be reversed
in case of sales return by non-register.
Note-5: No adjustment of bad debts is
allowed beyond 180 days.
CHAPTER - 1 SALES TAX SUMMARY (364)

6 Output Sales:
Tax Registered and 18% 18% 18%
(include active
tax paid in
Islamabad Un-registered 4% 4% 4%
on or registered
services) but inactive 4% further tax shall not form part of output tax and added as bottom-
( Sec 3, SRO line figure. 4% further tax is not payable in case of:
648(I)/2013 and
SRO (a) Supply including by retailers to end consumer including food,
692(I)/2019) beverages, fertilizers and vehicles.
(b) Supply of third schedule items
(c) Supplies made to Gov., semi- government and statutory
regulatory bodies.
(d) Zero rated supplies covered under fifth schedule
(e) Electricity and natural gas supplied to domestic/agriculture
consumers
(f) Fertilizers and white crystalline sugar
(g) motor spirit, diesel oil, jet fuel, kerosene oil, fuel oil
(h) supply of foam or spring mattresses and other foam product for
household use
(i) Second hand and worn clothing and other worn articles
(j) Supply to person who are not liable to register e.g.; cottage
industry, other than tier 1 retailers, persons dealing in exempt
goods etc.
(k) Supplies by steel and edible oil sector

Note: sales through retail outlets and to employees, educational

institutes, hospitals will not attract 4% further tax as they are end
users.
CHAPTER - 1 SALES TAX SUMMARY (365)

Special rates of The Federal Government is empowered to prescribe any higher or

tax [Sect lower rate of tax in respect of any class of taxable goods. Vide SRO
3(2)(b)] 297(I)/2023 dated 08 March 2023 Federal Government has directed to
charge sales tax @ 25% on import and subsequent supply of
following goods:
S.N Imported goods/Articles Tax
Rate
1. Confectionery 25%
2. Vehicles in CBU Condition 25%
3. Sanitary and bathroom wares 25%
4. Carpets (excluding those from Afghanistan) 25%
5. Chandeliers and lighting devices or 25%
equipment
6. Chocolates 25%
7. Corn flakes and other ready to use cereals 25%
8. Decorations or ornamental articles 25%
9. Dog and cat food only 25%
10. Doors and window frames 25%
11. Fish 25%
12. Footwear 25%
13. Fruits and dry fruits (excluding those 25%
imported through land route or barter
mechanism)
14. Furniture 25%
15. Jams, jellies and preserved fruits 25%
16. Leather jackers and apparels 25%
17. Fresh, chilled, frozen, preserved or 25%
processed meat
18. Musical instruments 25%
19. Pasta 25%
20. Arms and ammunition excluding defence 25%
stores
21. Sunglasses 25%
22. Tomato ketchup and sauces 25%
23. Travelling bags and suitcases 25%
24. A ship designed or adapted for use of 25%
recreation or pleasure or private use
25. An aircraft designed or adapted for use for 25%
recreation or pleasure or private use
26. Articles of jewellery 25%
27. Wristwatches 25%
CHAPTER - 1 SALES TAX SUMMARY (366)

Moreover, sales tax @ 25% will be charged on supply of following

locally manufactured goods:

S.N Supply of locally manufactured goods Tax

Rate
1. Locally manufactured or assembled SUVs 25%
and CUVs
2. Locally manufactured or assembled vehicles 25%
having engine capacity of 1400cc and above
3. Locally manufactured or assembled double 25%
cabin (4x4) pick up vehicles
Collection of Any excess output tax collected by mistake and the incidence of
excess tax which has been passed on to the customer, shall be paid to
(Sec-3B) Government and no claim of refund is admissible. Burdon of proof
that incidence of tax has not been passed to consumer shall be on
the person collecting the tax.

Note: If burden has not been passed on to customer in supply chain,

then excess sales tax collected shall be refunded to buyer through
debit/credit note adjustment.
Goods supplied Tax-exempt areas means Azad Jammu and Kashmir, Gilgit-Baltistan,
from tax Tribal Areas as defined in Article 246 of the Constitution of the Islamic
exempt areas Republic of Pakistan and Border Sustenance Markets.
(Sec 40D, Rule
69) and According to the sales tax rule 69C, the person bringing, or causing to
Sales tax bring, taxable goods from tax exempt area shall be required to be
payable by registered under the Act and all the provisions of the Act shall apply
wholesalers/Dis accordingly.
tributors on
products The liability of payment of tax or taxes and furnishing of prescribed
originating from documents shall be on the person bringing, or causing to bring, taxable
AJ & K (Sales goods from tax exempt area and supplying the same in taxable area.
tax General
Order 107 of Note: Sales tax will be charged @ 18% in case of supply from tax
2019) exempt areas to Pakistan. However, in case of supply from
FATA/PATA, sales tax is chargeable @ 16% under eight schedule.

A registered person is entitled to the adjustment of any input tax paid

under the Sales Tax Act, 1990 as adopted in Azad Jammu and
Kashmir.

Section 40D has been introduced, which prescribes the procedure for
transporting goods from tax-exempt areas (AJK, Gilgit, and Border
Sustenance Markets (BSM) established in cooperation with Iran and
Afghanistan) to taxable areas of Pakistan.

Besides other points the said section clearly indicates that

Conveyance carrying goods from exempt areas shall be accompanied
by the prescribed documents and RTOs shall establish check posts on
routes originating from tax exempt area for examining goods and
documents and in the absence of prescribed documents vehicles
carrying goods will be seized.
CHAPTER - 1 SALES TAX SUMMARY (367)

Sales Tax General Order 107 dated 21 November 2019

(1) Under an AJ&K Notification No. FD/Tax 1145- 1245/95, dated
8.2.1995, sales tax is exempted on all goods manufactured in
AJ&K except some specified items. It is emphasized that such
notification shall not apply to supplies made in Pakistan and the
distributors/dealers in Pakistan of such items originating from
AJ&K shall charge sales tax at applicable rates and values, or
printed retail price in case of items falling in the Third Schedule to
the Act, and deposit the same in Pakistan as per law.

(2) In case a manufacturer in AJ&K, establishes self-owned

distribution, wholesale or retail establishment in Pakistan and
takes the pretext that the supply is originating from AJ&K and is
not subject to sales tax law in Pakistan, it is clarified that the
establishment of such a concern in Pakistan and making of
supplies by the same, shall be construed as engaging in taxable
activity and making supplies in Pakistan, and such distribution,
wholesale or retail concern shall be required to get itself
registered and deposit sales tax on its supplies in Pakistan as per
law.
Monitoring or (1) The Board has specified registered persons dealing in (a) tobacco
tracking by Products (b) beverages; (c) sugar (d) fertilize (e) cement and (f)
electronic or petroleum products for monitoring or tracking of production, sales,
other means clearances, stocks or any other related activity to be implemented
(Sec-40C) through electronic or other means.
(2) No taxable goods shall be removed or sold by the manufacturer
or any other person without affixing tax stamp, bandrole stickers,
labels, barcodes, etc. in any such form, style and manner as may
be prescribed by the Board.
(3) Such tax stamps, banderols, stickers, labels, barcodes etc., shall
be acquired by the registered person from a licensee appointed
by the Board against price approved by Board.
Penalty for non-compliance (Sec 33, sno.23)
(1) Any person who manufactures, possesses, transports,
distributes, stores or sells above goods with counterfeited tax
stamps, banderoles, stickers, labels or barcodes or without tax
stamps, banderoles, stickers, labels:
(i) Such goods shall be liable to outright confiscation. Any person
committing the offence shall pay a penalty of Rs.25,000 or 100%
of the amount of tax involved, whichever is higher. He shall,
further be liable, upon conviction by a Special Judge, to simple
imprisonment for a term which may extend to three years, or with
additional fine which may extend to an amount equal to the loss
of tax involved, or with both.
(ii) In case of transport of goods with counterfeited tax stamps,
banderoles, stickers, labels or barcodes, or without tax stamps,
banderoles, stickers, labels or barcodes, permanent seizure of the
vehicle used for transportation of non-conforming or counterfeit
specified goods, and
(iii) In case of repeat sale of specified goods without or with
counterfeited, tax stamps, banderoles, stickers, labels or
barcodes, the premises used for such sale be sealed for a period
not exceeding fifteen days.
CHAPTER - 1 SALES TAX SUMMARY (368)

(2) Any person, who is required to integrate his business for

monitoring, tracking, reporting or recording of sales, production
and similar business transactions with the Board or its
computerized system, fails to get himself registered under the
Act, and if registered, fails to integrate in the manner as required
under law, such person shall be liable to pay penalty upto 1 million
and if continues to commit the offence after period of 2 months
after the penalty imposition as aforesaid, his business premises
shall be sealed and embargo placed on his sales, till such time
he integrates his business (Sec 33, S.no. 25).
Default (a) in case person is liable to pay any amount of tax, shall pay default
surcharge (Sec- surcharge @ 12% per annum from 16th day of the month
34) (following due date of 15th) to the day preceding the date on
which tax due is paid.
(b) in case default is on account of tax fraud, 2% per month of amount
of tax evaded till such time the entire liability is paid.
Note-1: In case of inadmissible credit/refund period of default to be
calculated from date of adjustment.
Note-2: Default surcharge shall be calculated on outstanding amount
only. Shall not be calculated on penalty.
Note-3: Board may be special order or Federal Government by
notification in official gazette exempt any person from payment of
penalty and default surcharge.
Penalty, return (1) Failure to file return within due date- penalty of Rs.10,000.
revision and However, penalty will be Rs.200 per day only if return filed within
waiver on 10 days of the due date.
return revision (2) A registered person may file revision return within 120 days after
(Sec-26,33) obtaining approval of Commissioner. Approval of Commissioner
not required if return filed within 60 days and tax payable therein
is more than amount paid or refund claimed is less than claimed
in original return.
(3) A register person may apply to CIR by due date for extension in
the time for filing of monthly sales tax returns and the CIR may
grant extension on the basis of satisfactory reasons, however
extension shall not be granted for more than 15 days, unless there
are exceptional circumstances. In case of rejection by CIR,
registered person may apply to Chief Commissioner. Such
extensions in time would not relieve the registered person from
payment of default surcharge for such extended period.
(4) failure to deposit tax within due date- penalty of Rs. 10,000 or 5%
of amount of tax involved whichever is higher.
Note-1: No penalty to be recovered if person files revise return
voluntarily before receipt of any audit notice along with due tax and
default surcharge.
Note-2: Only 25% of penalty to be recovered if person wishes to
deposit tax during audit or before issuance of show cause along with
due tax and default surcharge.
Note-3: Full amount of penalty to be recovered if person wishes to
deposit tax after issuance of show cause along with due tax and
default surcharge.
Joint and If a registered person receiving taxable supply from another registered
several liability person is in knowledge that tax payable in respect of that supply or
of registered any previous or subsequent supply would remain unpaid (burden
person (Sec- of proof on tax department), he shall be jointly liable for such unpaid
8A) tax.
CHAPTER - 1 SALES TAX SUMMARY (369)

Assessment (a) where a person fails to file return or pay tax, CIR may issue a show
Tax not levied cause notice within 5 years of end of the financial year in which the
due to error relevant date falls. Further, assessment order after show cause
(Sec-11) must be made within 120 of issuance of show cause. CIR may
further extend upto 90 days.
(b) Where by reason of any inadvertence, error or misconstruction any
tax or charge has not been levied, the person shall be served with
the notice and tax shall be recovered as tax fraction (18/118) of
value of supply.
Determination  Where a registered person fails to file a return by the due date, an
of minimum tax officer shall issue a notice to file return within fifteen days failing
liability (Rule which his minimum liability would be determined.
157)
 If the registered person files the return within the time as stipulated
in the notice, the notice shall abate.
 If otherwise, the officer shall proceed to determine the minimum
liability in the following manner:
(a). The minimum tax liability of the registered person for a tax
period shall not be less than the highest amount of tax paid by
the registered person in any of the tax periods during the
previous twelve months.
(b). In case the tax paid in the previous twelve months is Nil, the
minimum tax liability shall be calculated on the basis of monthly
average of the sales declared by the registered person to the
income tax department for the last assessment year
(c). In case minimum tax liability cannot be determined in the
manner given above, it shall be determined taking into account
three or more of the following factors: (a) Location of business;
(b) Type of business (i.e., retail etc.); (c) Item produced /
supplied or service provided; (d) No of persons employed; (e)
Capital employed in the business; (f) Amount of utility bills i.e.,
phones, electricity, gas and water; and (g) Production capacity
of machinery installed.
 If the registered person files the return and pays the due amount of
sales tax for the tax period along with additional tax and penalty
within one month of the determination made as above, the order of
minimum tax liability will be considered to have been withdrawn. In
case the registered person does not pay the amount of sales tax
determined for the tax period, the tax liability determined will be
recovered under section 48 of the Sales Tax Act, 1990
 The determination made in the aforesaid manner shall be the
minimum liability, and the payment thereof shall not absolve the
registered person of further liability which may accrue or be
determined at a later stage through audit or otherwise on the basis
of available record under the provisions of law.
Liability in case (1) Where any tax in respect of private company/business enterprise
of private cannot be recovered in the course of liquidation, every person who
company or was owner, partner, director or shareholder owning not less than
Business 10 percent of paid-up capital in company or enterprise shall be
enterprise (Sec- jointly and severally liable for payment of such tax.
58)
(2) Any partner, director or shareholder shall be entitled to recover the
tax paid by him from the company or from other director, partner or
shareholder.
CHAPTER - 1 SALES TAX SUMMARY (370)

Sale of taxable Sale to non-registered person: In this case Possession of taxable

activity or goods by registered person shall be a taxable supply he shall be
transfer of required to pay tax on the taxable goods held by him. Tax unpaid is first
ownership charge on business assets to be recovered from transferee in case of
(Sec-49) non-recoverability from registered person.
Supply to registered person as ongoing concern: In this case
taxable goods shall be transferred to new owner through zero rated
invoice and sale tax shall be paid by buyer subsequently on sale.
Note: In case of supply as ongoing concern any input b/f of previous
entity will be refundable only. cannot be adjusted against liability of
new entity.

Zero rated (a) Goods exported (b) supply of stores and provisions for consumption
supplies (Sec 4, aboard a conveyance proceeding to destination outside Pakistan and
5th Schedule) (c) goods mentioned in 5th Schedule (d) Such goods as federal govt.
may specify under special circumstances of national security/disaster
etc., are zero rated.
Note: Supply of stores to plane/ship proceeding to destination within
Pakistan is not zero rated and will be subject to normal tax @ 18%.
Following exports are not zero rated:
(a) Goods exported for importation
(b) Goods exported to countries restricted by FG e.g. supply of goods
manufactured in export processing zone (EPZ) exported other than
LC or advance payment or certain goods (cigars, dyes, chemicals,
ball bearings, yarn, all petroleum products etc.) to Afghanistan or
through Afghanistan to central Asian Republics by land or air route.
(c) Goods entered for export under custom act but never exported.
Note: In above three cases exports will be subject to tax @
18%.
Following supplies mentioned in 5th Schedule are zero rated:
Supply subject (a) Supply to diplomats, diplomatic missions, privileged persons
to sales tax @ (b) Supply of RM and goods for further manufacturing in EPZ. (Goods
0%. Whereas supplied not for further manufacturing to any person e.g. retailer in
input tax paid is EPZ will be taxable @ 18%).
refundable Note: Supply of capital goods (e.g. plant and machinery) in EPZ
will be taxable @ 18%.
(c) Local supply of commodities, raw materials, components, parts
and plant and machinery to registered exporters authorized under
Export Facilitation Scheme, 2021 notified by Board.
(d) Supply of locally manufactured plant and machinery to
manufacturers in Gwadar Free Zone subject to conditions and
restrictions specified in Sno. 14 of the 5th Schedule.
(e) RM, Components and sub components imported or purchased
locally for use in manufacture of P & M chargeable to tax @ 0%.
(f) Supplies to exporter under duty tax and remission rules (DTRE
Scheme)
Note: Buyers who opt for DTRE Scheme can import or purchase
lgoods for use in the manufacture of exportable goods without
payment of sales tax. Since all such purchases are made against
CHAPTER - 1 SALES TAX SUMMARY (371)

future exports, such buyers (exporters') make financial savings

and avoid the hassle of seeking refunds against zero rated exports.
(g) Petroleum crude oil
(h) Import or supply of milk
(i) imports or supplies made to Gawadar Special Economic Zone
(j) Preparations suitable for infants, put up for retail sale not
exceeding rupee six hundred per two hundred grams, colors in
sets, writing inks, erasers, exercise books, pencil sharpeners,
geometry box, pens, ball pens, pencils, including color pencils and
any RM, P & M, components imported or purchased locally for
manufacture of said goods subject to restrictions for claiming zero
rating prescribed by Board).
Note: Same will be exempt if conditions prescribed by Board are
not fulfilled.
(k) Supplies made by tier-1 retailers to diplomats and diplomatic
missions subject to provision of exemption certificate by Ministry of
Foreign Affairs.
(l) Supplies of raw materials, components and goods for further
manufacturing of goods in Gwadar Free Zone and export thereof.
However, in case of supply to tariff area of Pakistan tax shall be
charged on the value assessed on the Goods declaration for
import.
(m) Fat filled milk whether or not sold in retail packing under brand
name.
(n) Imports or supplies made by, for or to a qualified investment as
specified at Serial No.1 of the First Schedule to the Foreign
Investment (Promotion and Protection) Act, 2022 for the period as
specified in the Second Schedule to the said Act.
Note: Presently, the Reko Diq Project in the Province of Balochistan,
including the Reko Diq Mining Company (Private) Limited and its
associated companies, have been listed in the First Schedule to the
FIPPA, 2022 as Qualified Investment.
Note:
Through Finance (Supplementary) Act, 2022, zero rating has been
withdrawn on the following goods:
 Supply to duty free shops
 Supply of locally manufactured plant and machinery to
manufacturers in EPZ
 Bicycles and all raw material used for its manufacturing
 Supply, repair and maintenance of any ship of gross tonnage of
greater than 15 LDT or not used for recreation purpose.
Consequently, import and supply of above goods will now be
subject to sales tax @ 18%.
Similarly exempt goods if exported by manufacturers are no longer
zero rated and will remain exempt. Consequently, no sales tax input
will be allowed on export of exempt manufactured goods.
CHAPTER - 1 SALES TAX SUMMARY (372)

Exempt supplies Sixth Schedule-Table I, Sixth Schedule-Table II, III & IV (supply
((a) Goods III & IV (Import is is exempt)
mentioned in 6th exempt)
Schedule & (b) Import: Supplies:
Federal Govt
may grant Import exempt: Table I
exemption (a) import of plant, (a) Supplies to tribal areas till June 2024.
whenever the machinery, equipment
circumstances Note: Supply to Azad Kashmir and Gilgit
for installation in tribal
exist is fully taxable @ 18%.
areas and of industrial
inputs by industries (aa) Goods donated to hospital run by
located in tribal areas till non- profit making institutions subject to
30 June 2024. zero percent custom duty.
(b) Goods imported by (aaa) Goods excluding electricity and
hospital run by non- natural gas supplied to hospitals run by the
profit making institutions charitable hospital of 50 beds or more.
subject to zero percent
(aaaa) Seeds for sowing, Tractors,
custom duty
Oilcake, Fertilizers (excluding DAP)
(c) Goods temporarily
Note: import and supply of DAP is
imported for subsequent
subject to 5% tax under 8th schedule with
exportation charged to
no refund of excess input.
zero rate of custom duty
(b) Supply of electricity to all consumers
(d) Seeds for sowing,
in Tribal areas. Exemption not available to
Tractors, Fertilizers
industries established after 31 May 2018.
(excluding DAP),
Exemption also not available to steel,
Oilcake, pulses
ghee or cooking industries.
(e) Red chilies, Ginger
(c) Construction material to Gawadar
and turmeric excluding
Export Processing Zone
those sold under brand
names and trade mark. (d) Supply made by businesses to be
established in Gwadar Free Zone for 23
Years.
Note: same will be fully
Note: Supplies made outside Gwadar
taxable if imported under
free zone will be fully taxable.
brand name whether in
retail packing or in bulk.
(e) Import and supply of iodized salt
(f) import of plant,
bearing brand names and trademarks
machinery, equipment
whether or not sold in retail packing.
and raw materials for:
(i). exclusive use within
(f) Currency notes, bank notes, shares,
limits of EPZ/Gwader
stocks and bonds, pulses
Free Zone
(ii). for consumption of (g) Red chilies, Ginger and turmeric
these items within excluding those sold under brand names
special technology and trade mark.
zone
Note: Same will be fully taxable if sold
(iii). by registered person
under brand name whether in retail
authorized under
packing or in bulk.
export facilitation
scheme,2021 notified
(h) Rice, wheat, wheat and maslin flour
by Board.
CHAPTER - 1 SALES TAX SUMMARY (373)

(g) import of machinery, (i) newsprint and educational textbooks

equipment and other but excluding brochures, leaflets and
project related items for: directories
Table II (Local supply is exempt)
(i). setting up of hotels,
power generation (a) Supplies by cottage industry (Supply
plants, water to Cottage Industry is not exempt)
treatment plants
(b) live animals, live poultry, raw hides
located in area of
and skins
30km around the zero
point in Gwadar (c) Flavored milk, milk and cream, yogurt
excluding those sold in retail packing
(ii). Initial installation, under brand name.
BMR or expansion of
Note: Same will be fully taxable if sold in
projects for power
retail packing under brand name.
generation through
However same will be exempt if sold in
hydel, oil, gas, coal,
bulk under brand name.
nuclear and
renewable energy. (d) Supply of fixed assets against which
(iii). Manufacture/assembl input tax is not allowed.
y of electric vehicles
(e) Agriculture produce not subject to
for one time
further process.
The above exemptions (f) Cereals other than rice, wheat, wheat
will be granted subject to and meslin flour
following conditions:
(g) Foodstuff cooked or prepared in
house for serving in messes for workers.
(i). Items are not locally
manufactured (h) edible vegetables excluding those
(ii). CEO undertaking that bottled or canned
above items are
bonafide project (i) edible fruits, sugar cane, eggs, compost
requirement. (j) locally manufactured laptops,
(iii). Goods not to be sold computers
without prior approval
of FBR Note: Sale of imported laptops is subject
to sales tax @ 5% under 8th schedule.
(h) Construction (k), Butter, Desi ghee, Cheese, Processed
machinery, equipment cheese, Products of meat or meat offal,
and specialized vehicles Meat of bovine animals, sheep, goat,
excluding passenger Uncooked poultry meat and fish excluding
vehicle imported on sold under a brand name or trademark.
temporary bases as
required for construction Note 1: Only local sale is exempt. Import
of project. is fully taxable @ 18%.
Note 2: Same will be fully taxable if sold
(i) Import of iodized salt under brand name whether in retail
bearing brand names packing or in bulk.
and trademarks whether
or not sold in retail (l) All the goods mentioned in table-IV of
packing. 6th schedule when supplied within the
limits of the Border Sustenance Markets
(j) Goods produced or (BSM) established in cooperation with Iran
manufactured in and and Afghanistan. Such goods shall be
exported from Pakistan
CHAPTER - 1 SALES TAX SUMMARY (374)

which are subsequently supplied only within the limits of Border

imported within one year Sustenance Markets established in
of export. cooperation with Iran and Afghanistan

(k) Rice, wheat, wheat Note: if goods are brought outside the
and maslin flour limits of such markets, sales tax shall be
charged on the value assessed on the
(l) edible vegetables goods declaration import or the fair market
imported from value, whichever is higher;
Afghanistan except
potato and onions but (m) newspaper and books, fruit juices
excluding bottled or excluding bottled or canned, wheat bran,
canned sugar beet, locally produced silos, poultry
and cattle feed
(m) Fruits imported from
Afghanistan except (n) Bread, nan, chapatti, sheer mal
apples prepared in tandoors excluding those
prepared in bakeries, restaurants, food
(n) Liquified natural gas chains and sweet shops.
imported by fertilizer
manufacturers as feed (0) Prepared food or foodstuff supplied by
stock. Restaurants and caterers
Note: They will now be taxable under
(0) import of CKD Kits by provinces including Islamabad.
local manufacturers of
following electric (p) import and supply of solar panels
vehicles: (Photovoltaic cells)

(i). Small cars/SUV with (q) Various equipment required for

50 Kwh battery or cardiology/cardiac surgery,
below neurovascular, endoscopy, oncology,
(ii). Light commercial gynaecology etc.
vehicles with 150
Kwh battery or below
(iii). Three wheeler
electric
rickshaw/loader
(iv). Electric
motorcycle/buses/truc
ks

(p) Parts for assembling

and manufacturing
personal computers and
laptops if imported by
manufacturer registered
with Engineering
Development Board.
(q) All the goods
mentioned in table-IV of
6th schedule when
imported within the limits
of the Border
Sustenance Markets
(BSM) established in
CHAPTER - 1 SALES TAX SUMMARY (375)

cooperation with Iran and

Afghanistan. Goods
imported shall be
allowed clearance by the
Customs Authorities
subject to furnishing of
bank guarantee equal to
the amount of sales tax
involved and the same
shall be released after
presentation of
consumption certificate
issued by the
Commissioner Inland
Revenue having
jurisdiction

(r) Various equipment

required for
cardiology/cardiac
surgery, neurovascular,
endoscopy, oncology,
gynaecology etc.

Eight Schedule Import or supply:

Goods specified in
Rate 10%:
Eight Schedule are
charged at (a) LPG import and local supply of such
reduced rate. imported LPG
(b) Rock phosphate if imported by
fertilizer manufacturer for use in the
manufacturing of fertilizers.
Note: Sale of rock phosphate will be
subject to tax @ 18%. Reduced rate of
10% is applicable on imports for
manufacturer of fertilizers only.
Rate 5%:
(a) personal computers and laptop
computers, notebooks if imported in CBU
condition
Note: sale of locally manufactured
laptop/computers is exempt under 6th
schedule.
(b) import of cinematographic equipment
subject to 3% custom duty
(c) Secondhand and worn clothing or
footwear.
CHAPTER - 1 SALES TAX SUMMARY (376)

(d) Natural gas/Phosphoric acid if

supplied to fertilizer plants for urea
manufacturing.
Other:
(a) Pharma Sector
(1) Substances registered as drugs under
the Drugs Act, 1976 and medicaments as
are classifiable under chapter 30 of the
First Schedule to the Customs Act, 1969
except the following:
 filled infusion solution bags imported
with or without infusion given sets;
 scrubs, detergents and washing
preparations;
 oft soap or no soap;
 adhesive plaster;
 surgical tapes;
 liquid paraffin;
 disinfectants, and
 cosmetics and toilet preparations.
This substitution shall be deemed to have
been made from the 1st day of July, 2022
Rate will be 1% subject to condition that:
(i). tax charged and deposited by the
manufacturer or importer, as the case
may be, shall be final discharge of tax
in the supply chain
(ii). No input tax shall be adjusted in the
supply chain.
(2) Raw materials for the basic
manufacture of pharmaceutical active
ingredients (API’s) and for manufacture of
pharmaceutical products, provided that in
case of import, only such raw materials
shall be entitled to reduced rate which are
liable to customs duty not exceeding
eleven per cent ad valorem under the
Customs Act, 1969.
Rate will be 1% subject to condition that:
(i). DRAP shall certify item-wise
requirement of manufacturers of
drugs and APIs and in case of import
shall furnish all relevant information
to Pakistan Customs Computerized
System
(ii). No input tax shall be adjusted in the
supply chain.
Note: from 01 July 2023 benefit of 1% will
be available on all local plus imported
pharma raw material including excipients
(e.g. sugar, artificial flavours etc.).
CHAPTER - 1 SALES TAX SUMMARY (377)

However all imported pharma raw

material having CD rate above 11% would
now be taxed at standard rate of 18%.

(c) EV transport buses of 25 seats or

more in CBU conditions: 1%
(d) Supplies of locally manufactured
finished articles of textile, textile made
ups, leather and artificial leather as made
by retailer who have integrated with
Board’s computerized system: 15%
Note: Rate will be 15% only if retail
outlets are integrated with FBR's
computerized system in real time and
have maintained value addition of 4%
during last 6 months. Otherwise, 18% will
be charged.
(e) locally produced coal: Rs. 700 per
metric ton or 18%whichever is higher
(f) Potassium chlorate : 18% plus Rs.60
per kg. Rs. 60/kg not applicable on
import/supply to organization under
control of Ministry of Defence
(g) locally manufactured or assemble
electric vehicles (4 wheelers) if supplied
locally: 1%
(h) import of electric vehicles in CBU
condition of 50KW battery or below-
12.5%
Note: standard rate of 18% will be
applicable in case of greater than 50KW
battery
(i) Goods supplied from tax-exempt areas
of
FATA/PATA to the taxable areas- 16%
(j) Locally manufactured or assembled
motorcars of cylinder capacity upto
850cc-12.5%
(k) supply of locally manufactured hybrid
electric vehicles:
(i). Upto 1800cc - 8.5%
(ii). From 1801-2500cc- 12.75%
(iii). Above 2500cc 18%
Note: imported hybrid electric cars
irrespective of cylinder capacity will be
subject to normal sales tax of 18%.
(l) Supply of locally manufactured article
of jewelery, or parts thereof of precious
metal or of metal clad with precious metal:
3%
CHAPTER - 1 SALES TAX SUMMARY (378)

Note 1: No input adjustment will be

allowed to jewelers.

Note 2: Import of jewelery articles and

there onward sale will be subject to 25%
sales tax.

(m) DAP- 5% subject to condition that no

refund of excessive input tax if any shall
be admissible.

Note-1: Input tax is allowed on all 8th

Schedule items, except agriculture and
related equipment which are subject to
7% tax. Further 3% value addition tax
also to be paid if these items are imported
except second hand/worn clothing,
footwear.
Note-2: Further tax @ 4% is also
chargeable as bottom-line figure in case
of sale of Eight Schedule items to
unregistered persons. However, it is not
applicable in case of secondhand/worn
clothing or footwear, fertilizers and sale to
end consumers.
CHAPTER - 1 SALES TAX SUMMARY (379)

Ninth Schedule Import of mobiles in CBU or SKD/CKD condition:

(Mobile and In case of cellular mobile phones or satellite phones a fixed amount
satellite phones) of sales tax is to paid by every importer on import on the basis of
import value per set.
For CBU (Completely Build Unit)
Fixed rate is charged if per set value does not exceeds US $ 200. For
set value between US $ 200-500, sales tax @ 18% is charged
instead of fixed rate. For set value exceeding US $ 500, sales tax will
be charged @ 25%.
For SKD/CKD (Semi/Completely Knocked down )
Fixed rate is charged for all sets including greater than US $ 200.
No value addition tax @ 3% is payable on import of mobiles and fixed
tax/18%/25% tax on import will constitute final tax. Tax paid will not
be deductible against output tax payable and importer will have to
deposit this tax to custom authorities at the time of import.
Registration of IMEI number:
Every Cellular Mobile Operator (CMO) is required to pay fixed sales
tax as per slabs given in ninth schedule at the time of registration of
International Mobile Equipment Identity (IMEI) number in his system.
Local sale of manufactured mobiles in CBU
Sales tax is paid by manufacturer only in case of locally
manufactured cellular mobile phones as per fixed rate (Rs.10 for all
set values) given in ninth schedule. The input tax paid on the input
goods attributable to the mobiles manufacturing shall not be
deductible from fixed tax payable under ninth schedule on sale of
manufactured mobiles. Fixed tax will be deposited on due date (15th
of the following month).
Tenth Schedule (1) Sec 3(1B) empowers FBR to notify the taxable supplies on which
Sec 3(1B) sales tax may be levied and collected on the basis of production
capacity or any other fixed basis in lieu of normal sales tax regime.
(2) In 10th Schedule bricks kilns are required to pay fixed sales tax on
monthly basis as per following rates:
(a) Lahore, Rawalpindi and Islamabad- Rs. 12,500 per month (b)
Northern and middle district of Punjab- Rs. 10,000 per month (c)
District of South Punjab, Sindh, KPK and
Baluchistan- Rs. 7,500 per month
Further, they are required to report above sales tax paid through
quarterly filing of sales tax return.
(3) Similarly tax on cement or concrete blocks is charged on fixed
basis.
No input tax adjustment shall be allowed against the fixed tax paid
under this schedule.
CHAPTER - 1 SALES TAX SUMMARY (380)

Thirteenth (1) In respect of goods, specified in the Thirteenth Schedule, the

Schedule minimum production for a month shall be determined on the basis of a
single or more inputs as consumed in the production process as per
Sec 3(9AA)
criterion specified in the Thirteenth Schedule and if minimum
production so determined exceeds the actual supplies for the month,
such minimum production shall be treated as quantity supplied during
the month.
(2) The minimum production for steel products shall be determined as
per criterion specified against each in the Table below:
Product Production Board fixed value-SRO
criteria 501(I)/2023
Steel billets and One metric ton Steel billets:Rs.195,000/MT
ingots per 700 kwh of Ingots: Rs.180,000/MT
electricity
consumed
Steel bars and One metric ton Rs.225,000/MT
other re-rolled per 110 kwh of
long profiles of electricity
steel consumed
Ship plates and 85% of the Ship plate: Rs.172,000/MT
other re-rollable weight of the Other re-rollable scrap:
scrap vessel imported Rs.160,880/MT
for breaking
In case the value of supply of the goods specified in SRO 501(I)/2023
is higher than the values fixed above, the sales tax to be charged on
such higher value.
(3) Both actual and minimum production, and the local supplies shall
be declared in the monthly return. In case, the minimum production
exceeds actual supplies for the month, the liability to pay tax shall be
discharged on the basis of minimum production
(4) In case, in a subsequent month, the actual supplies exceed the
minimum production, the registered person shall be entitled to get
adjustment of excess tax on account of excess of minimum production
over actual supplies.
Provided further that in a full year, as per financial year of the company
or registered person, or period starting from July to June next year, in
other cases, the tax actually paid shall not be less than the liability
determined on the basis of minimum production for that year and in
case of excess payment no refund shall be admissible
(5) In case of ship-breaking, the liability against minimum production,
or actual supplies, whichever is higher, shall be deposited on monthly
basis on proportionate basis depending upon the time required to break
the vessel.
(6) The payment of tax on ship plates in aforesaid manner does not
absolve ship breakers of any tax liability in respect of items other than
ship plates obtained by ship-breaking.
Note: Input will be allowed as per normal unless restricted u/s 8.
CHAPTER - 1 SALES TAX SUMMARY (381)

Five Export (1) Through Finance Act, 2019 zero rating facility to these five sectors
oriented has been withdrawn. Thus, sales tax will be applicable on imports and
items (Textile, local supplies of the taxable goods by these sectors at standard rate of
carpets, 18%. Moreover, zero rating of utilities (gas, electricity and fuels)
leather, allowed to these export oriented sectors are also subject to sales tax
sports and @ 18%. However, their exports are still zero rated.
surgical (2) Supplies of finished articles of textile, textile made ups, leather and
goods artificial leather as made by retailers will be subject to sales tax @ 15%
provided retail outlets are integrated with FBR online system on real
time basis.
7 Determinati Liability Imported goods- Supply of goods- person making the supply. However,
on of tax to pay Person importing Board with approval of Federal Minister in Charge
liability goods irrespective of may specify goods in respect of which the liability to
(Sec-3,7) their final destination pay tax shall be of the person receiving the supply.
in territories of
Pakistan. (Tariff or Note 1: FBR has specified through SRO 1087(I)/2019
non-tariff) that in case of ginned cotton liability to pay sales tax
shall be of the person receiving the supply.

Note 2: Federal Government may allow payment of

sales tax on installments basis to Federal or Provincial
Governments or any public sector organization on
import or supply of goods. Payment may be allowed
from any previous date.
Formula Output Output - Manufacturer, Dealer, Distributor, Wholesaler,
- Input Input Retailer (Tier 1)
Output – Input. However, a registered person is not
allowed to adjust input in excess of 90% of the output.
Excess amount shall be carried forward to next period
and treated as input of that period.
Note 1: Full input claimable on purchase of fixed
assets. 90% rule not applicable.
Note 2: Full amount of Input tax (i.e., 100%) will be
allowed against sale of locally manufactured electric
vehicles subject to reduced rate tax of 1% under 8 th
schedule, however any excess input tax will neither
be refunded nor carried forward.
Retailers:
(a) Registered retailers:
(1) Tier I retailers: will pay sales tax under standard
regime except jeweler who will pay sales tax @ 3%
with no input tax adjustment.
(2) Retailers of finished articles of textile, textile made-
ups, leather, and artificial leather supplied by Tier-1
retailer will be chargeable to tax @ 15% subject to
integration and the condition that minimum value
addition of 4% during the last six months have been
maintained.
CHAPTER - 1 SALES TAX SUMMARY (382)

Note 1: Board has made it mandatory for Tier-1

retailers to integrate their system with FBR. In case of
non-compliance retailers adjustable input for the
period will be reduced by 60%.

(b) Non-registered retailers- will pay tax on their

electricity bills.
Rate is 18% plus 4% further tax for being
unregistered plus 5%-18% extra tax under SRO
1222(I)/2021 plus tax as follows:
Monthly bill Tax rate
Upto Rs. 10,000 5%
Rs.10,000 to Rs.20,000 7%
Rs.20,000 to Rs.30,000 10%
Rs.30,000 to Rs.40,000 12%
Rs.40,000 to Rs.50,000 15%
Above Rs.50,000 18%
Note 1: Electricity supplier (LESCO, FESCO etc.)
shall deposit the output tax so collected directly from
non-registered retailers without any adjustment
against their input tax.
Restriction Not applicable 90% Rule not applicable (Full adjustment of input with output)
of provided value of (aa) Oil & Marketing co and petroleum refineries, Persons
adjustment imports subject to registered in electrical energy sector and gas distribution
upto 90% of 3% value addition companies, telecommunication services, Pakistan Steel Bin Qasim
output tax exceed 50% Karachi,
(SRO of all taxable (b) distributor
1190(I)/2019 purchases. (90%
(c) person making zero rated supplies provided value of supplies
not applicable on
exceed 50% of all taxable supplies. (90% not applicable on whole
whole entity)
entity)
(d) Commercial importers provided value of imports subject to 3%
value addition tax exceeds 50% of value of all taxable purchases
including imports in a tax period.
(e) Registered persons other than manufacturers making supplies
of items covered under 3rd Schedule on which sales tax has been
paid by the manufacturer or importer on retail price provided value
of such supplies exceeds 80% of value of all taxable supplies in a
tax period
(f) CNG dealers provided the value of natural gas on which sales
tax is charged on the basis of value notified by the Federal Board
of Revenue exceeds 50% of value of all taxable purchases in a
tax period
(g) Petroleum dealers of licensed oil marketing companies
Adjustment of input upto 95% of output
Following persons may adjust input to the extent of 95% of output
tax for that tax period and the excess amount shall be carried
forward to the next tax period
(i). All Tier-1 retailers who have integrated all their POSs with the
Board
(ii). Wholesalers of yarn
CHAPTER - 1 SALES TAX SUMMARY (383)

8 Refund Manufacturer, Dealer, Distributor, Wholesaler,

(Sec To be made on yearly Retailer (Other than Zero rated)
10,66,67, basis in second month -DO- (Same as importer manufacturer)
67A) following the end of the
financial year. Auditor Zero rated supplies (Sec-10,67)
certificate also required
showing value addition less
Excess input tax shall be refunded not later than 45 days
than the limit prescribed
of filing of refund claim. In case refund not paid within
time of 45 days, compensation equal to KIBOR per
However, 3%value addition
annum shall be paid till outstanding period (Sec 67). Any
tax paid by commercial
demand under Income Tax or any other law shall also be
importer at the time of
adjusted before making payment.
import is not to be
refunded.it can only be
Refund of tax overpaid or paid through error (Sec
carried forward.
66)
Note: 3% Value addition
(i). No refund of tax claimed to have been paid or over
tax will be refunded in case
paid through inadvertence, error or misconstruction
imported goods are
or refund on account of input adjustment not claimed
exported in same condition
within the relevant tax period shall be allowed unless
by commercial importer.
the claim is made within one year of date of payment.
.
Further, application filed under this section shall be
disposed of within a period of not exceeding 90 days.

(ii). In case refund not paid within time of 45 days,

compensation equal to KIBOR per annum shall be
paid till outstanding period (Sec 67).

Payment of refund through refund bonds (Sec 67A)

Sales tax refunds may also be paid through refund bonds

only to those persons who opt for this scheme. In this
case compensation for delayed refund will not be
payable to taxpayer. Board will issue promissory note to
FBR refund settlement company incorporating details of
refund claimants. Bond will have maturity period of 3
years and profit rate of 10% per annum and will be
accepted as collateral by banks and traded freely in
secondary market. After maturity period, the company
shall return promissory note to Board and Board shall
make the payment of amount due under Bond along with
profit due to bond holders.

9 Third Schedule Retail Retail price, Retail price by manufacturer. For all other registered
items (3rd Sch) price, however persons in supply chain value of input and output
(ice cream, fruit however 3% value tax will be same (on retail price). Further 90%
juices, tea, shoe 3% value addition tax adjustment rule will not be available for traders
polish, shampoo, addition is not (dealers, distributors, retailers etc.) provided
toilet soap, tax is not payable manufacturer/importer has paid the tax and value of
cigarettes, payable such supplies by traders exceeds 80% of value of
cement, mineral all taxable supplies in a tax period.
water, foam and
spring mattress Note 1: if the phrase “in retail packing appears
for household, against any item/entry in 3rd schedule, the retail
CHAPTER - 1 SALES TAX SUMMARY (384)

motor cycle, price taxation shall not apply If such items are not in
Auto rickshaw, retail packing at the time of import. All other items
Tiles, Household shall be charged to sales tax on the basis of retail
electric goods price even if not in retail packing. (Sales tax general
including electric Order no.103 dated 07 August 2019).
iron and Following items are appearing in 3rd schedule with
telephone sets, the phrase “in retail packing”
Aerated water or  Spices and Biscuits in retail packing with brand
beverages, name
toothpaste,  Cement sold in retail packing
shaving cream,  Paints, distempers, polishes, colors, gums,
perfumery, lubricating oil, brake fluids sold in retail packing
mineral/bottled  Auto-parts in retail packing excluding those sold
water, syrups to automotive manufactures or assemblers
and squashes,
Biscuits in retail Note 2: Storage batteries, tyres and tubes and auto
packing, parts in retail packing are third schedule item only if
cosmetics etc.) they are not sold to automotive manufacturers/
assemblers. Sales tax will not be charged on retail
price in case these are sold to automotive
manufactures/assemblers.

Note 3: Foam or spring mattresses and other foam

products are third schedule item only if sold for
household use.

As per SRO 297(I)/2023 dated 08 March 2023

Federal Government has directed to charge sales
tax @ 25% on import and subsequent supply of
following third schedule goods:

S. Imported goods/Articles Tax Rate

N
1. Aerated water or beverages 25%
2. Cigarettes, Cigars and e- 25%
cigarettes
3. Cosmetic and shaving items 25%
4. Tissue papers 25%
5. Household articles including 25%
crockery, kitchenware and
tableware
6. Home appliances in CBU 25%
7. Ice cream 25%
8. Fruit and vegetable juices 25%
9. Mattress and sleeping bags 25%
10. Shampoos 25%
CHAPTER - 1 SALES TAX SUMMARY (385)

10 Applica Eleventh Not Not Applicable on goods supplied by all above

bility of Schedule applica applicable registered persons except following goods:
withhol ble on
ding imports. (a) Goods specified in 3rd Schedule and goods on
rules Applicabl which federal excise duty is payable in sales tax
e only on mode on the basis of retail price
sales.
(b) Supplies made by commercial importer who paid
value addition tax on such goods at the time of
import

(c) Supplies made by active taxpayer as defined in

the Sales Tax Act, 1990 to another registered
person with the exception of advertisement services
subject to Islamabad Capital Territory Sales Tax.

(d) electrical energy, natural gas, vegetable ghee

and cooking oil, petroleum products by OMC,
telecommunication services.

(e) Supply of sand, stone, crush and clay to low-cost

housing schemes sponsored or approved by Naya
Pakistan Housing and development Authority

Note: no withholding will be required even if the

goods are supplied by non-registered persons.
Withholding Same Same (a) Company as per ITO, 2001 excluding
agents companies exporting surgical instruments.
(b) Any Registered persons purchasing cane
molasses
(c) Recipient of advertisement services
(d) Autonomous bodies, federal and provincial
government departments, public sector org.
Note 1: In case of services, withholding is required
only if there is no withholding under relevant
provincial laws.
Note 2: Individual and AOP are not withholding
agent unless in case of purchase of cane molasses
and advertisement services in Islamabad.
Purchases N/A N/A (1) No withholding is required due to the exception
by active mentioned in (c) clause above. However full
taxpayer withholding tax will be deducted in case
from advertisement services is received from person
another registered in ICT.
active
taxpayer
Purchase N/A N/A (1) By Federal/Provincial Govt, autonomous body-
s by Fully amount of sales tax calculated at tax fraction
active (18/118) from persons liable to be registered but not
taxpayer actually registered.
from non-
registered (2) Other withholding agents: 5% (5/118) of value of
or non- goods from only those liable to be registered.
active
taxpayers
CHAPTER - 1 SALES TAX SUMMARY (386)

(3) Registered person purchasing cane molasses:

Full amount of sales tax (18/118)

(4) Persons manufacturing lead batteries: 75% of

the sales tax applicable shall be withheld from
persons supplying any kind of lead or scrap
batteries

(5) Online market place: 1% of gross value of

supplies. Liability to withhold tax on taxable supply
of such third party shall be on the operator of such
market place.