Pakistan Sales Tax (GST) Guide 2026

Overview — Federal and Provincial Sales Tax

Pakistan operates a dual sales tax system. The federal government levies sales tax on goods under the Sales Tax Act 1990 at a standard rate of 18%. Provincial governments (Sindh, Punjab, Balochistan, Khyber Pakhtunkhwa) levy sales tax on services at varying rates (typically 13–16%). The federal GST is administered by the FBR, while provincial sales tax on services is administered by respective provincial revenue authorities. The tax year follows the fiscal year (July–June).

Standard Rate — 18%

The standard federal GST rate on goods is 18%. This applies to most goods and some services at the federal level. The rate has remained at 18% since 2013, making it one of the highest standard VAT rates in South Asia (comparable to India's 18% GST rate). Certain goods attract reduced rates of 12%, 10%, or 5%, including essential items like certain food products and agricultural inputs.

Exempt and Zero-Rated Goods

Certain goods are exempt from GST or zero-rated (0% rate with input tax credit). Exempt supplies include unprocessed food items, certain pharmaceuticals, and educational materials. Zero-rated supplies include exports, supplies to diplomatic missions, and supplies in certain export-oriented sectors (textiles, leather, carpets, surgical goods, sports goods). The distinction is crucial: zero-rated supplies allow input tax recovery, while exempt supplies do not.

Registration Threshold

Businesses with taxable turnover exceeding PKR 10 million in any 12-month period must register for sales tax. Voluntary registration is permitted for businesses below the threshold. Non-resident persons making taxable supplies in Pakistan must also register. Registration is done via the FBR's IRIS portal and requires a valid NTN (National Tax Number).

Input Tax Adjustment

Registered persons may claim input tax credits on purchases used for taxable supplies. Input tax is adjusted against output tax in the same tax period. Restrictions apply to certain purchases, including passenger vehicles (limited adjustment), entertainment, and personal expenses. Input tax on capital goods may be adjusted over 24 equal installments. The FBR has strict documentation requirements for input tax claims, requiring invoices from registered suppliers.

Filing and Payment

Sales tax returns are filed monthly via the IRIS portal, due by the 18th of the following month. Annual returns are also required. Late filing attracts a penalty of PKR 10,000 plus PKR 100 per day. Default surcharge of 1% per month (12% per annum) applies on unpaid tax. The FBR has enhanced its digital enforcement, making real-time invoice verification mandatory for certain sectors.

FAQs

What is the difference between federal and provincial sales tax?

Federal GST applies to goods at 18% (standard rate). Provincial sales tax applies to services at rates varying by province (13–16%). Businesses dealing in both goods and services may need to register with both the FBR and the relevant provincial authority.

Can I claim a refund of input tax?

Yes, if input tax exceeds output tax in a tax period, the excess is carried forward (or refunded in certain cases such as exporters). Refunds are processed through the FBR's computerized system, though delays are common. Exporters are entitled to expedited refund processing.

What is the POS (Point of Sale) rule?

The FBR has mandated real-time electronic integration of POS systems with its computerized system for certain retail sectors (electronics, oil, cement, etc.). This enables real-time sales and transaction monitoring. Non-compliance carries substantial penalties.

Disclaimer

This guide provides general information about Pakistan's sales tax (GST) for 2026. Tax rates, exemptions, and procedures are subject to change. Always consult with a qualified tax advisor in Pakistan for advice specific to your situation. InvestmentKit does not provide tax advice.