Pakistan levies a sales tax on the supply of most goods and services in the country, including imports. The standard rate is 17%. Several higher and lower rates apply for certain supplies, and some supplies are zero-rated or exempt. Services are generally taxed at the provincial level, and rates may vary.

Higher rate supplies include:

21% for chemicals, plastic, paper, and asbestos
18.5% for iron and steel products
25% for gas supplies to compressed natural gas filling stations

Lower rate supplies include:

5% for tea
5% for local supplies by export oriented business of leather, textiles, carpets, sports and surgical goods to retailers and unregistered persons
8% for White crystalline sugar

Additional tax for non-registered persons

Additional Sales Tax of 1% is levied for supplies made to non-registered persons, and an additional 5% for non-registered commercial and industrial consumers of electricity and gas with a monthly bill in excess of PKR 15,000.

Additional tax for imports and certain manufactured goods

Importers of goods must pay an additional 3% sales tax when goods are imported. However, this does not apply for the import of input goods imported by manufactures.

Supplies by importers and manufactures of the following goods must charge an additional 2% sales tax

Most home appliances, TVs, refrigerators, electric ovens, etc.
CD and DVD players
Auto parts, including tires and tubes, and auto accessories
Lubricating oils and other vehicle fluids and maintenance products
Batters
Paints, enamels, resins, dyes, etc.
Biscuits, confections, chocolates, toffees and candies

Taxable value based on retail price

For certain supplies, the sales tax is based on the manufactures retail price and not the actual sales price. These include:

Fruit and vegetable juices
Ice cream
Aerated water or beverages and drink syrups
Cigarettes
Toilet soap, detergents, shampoo, toothpaste and shaving cream
Perfumes and cosmetics
Powder drinks and milk drinks

Zero-rated Supplies Include:

Exports
Certain imported or locally sourced goods for export oriented businesses

Service rates include:

17% standard rate
19.5% for telecommunication services
10% for franchise services (16% in Punjab Province)
4% for accounting, auditing, and legal services in Sindh Province

Exempt Supplies include:

Unprocessed agricultural products, including milk, eggs, fish, meat and produce
Live animals
Pharmaceuticals, including raw materials for production
Newspapers, books, journals and periodicals
Computer software
Educational and scientific materials
Equipment for fighting AIDS and cancer
Supplies made under international tenders
Crude oil, petroleum products and natural gas (except when supplied to compressed natural gas filling stations)

Registration Threshold

The following business are subject to sales tax and required to register:

Manufactures with taxable revenue exceeding PKR 10 million in the previous 12 months (PKR 5 million prior to 1 July 2016)
Retailers with total revenue exceeding PKR 5 million in the previous 12 months (including taxable and nontaxable revenue)
Manufactures whose utility bills exceed PKR 800,000 in any tax period in the previous 12 months;
The following businesses regardless of their taxable revenue amount:
- Importers
- Wholesalers and distributors
- Commercial exporters
- Taxable service providers

Simplified Sales Tax Regime

Effective 1 July 2016, a simplified sales tax regime has been introduced for qualifying tier-1 retailers. Under this regime, qualifying retailers may opt to apply sales tax at a rate of 2% on total turnover (standard rate 17%), but lose the ability to claim any input tax on their supplies. For the purpose of the simplified regime, total turnover includes turnover related to both taxable and exempt supplies.

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