As per Lawkidunya, Pakistan’s sales tax laws and regulations are outlined in the Sales Tax Act, 1990, which was amended up to 30th June, 2024. The Act imposes a tax on the sale and supply of goods and services, as well as on imported goods.

Scope of Sales Tax

Sales tax applies to all goods, except those exempted under Section 13 of the Sales Tax Act, 1990, such as computer software, poultry feeds, medicines, and unprocessed agricultural produce. Services are also subject to sales tax, with certain exceptions.

Registration

Businesses with a taxable turnover exceeding Rs. 5 million are required to register for sales tax ³. Manufacturers with a taxable turnover below Rs. 5 million and utility bills below Rs. 7 lac during the last 12 months are exempt from registration and payment of sales tax.

Rate of Sales Tax

The standard rate of sales tax is 16% of the value of supplies. However, certain items are chargeable to sales tax at 18.5% or 21% of the value of supplies.

Returns and Refunds

Registered businesses must file a return by the 15th of each month, detailing sales made in the previous month. Refunds are available in cases where the input tax exceeds the output tax due to exports or other zero-rated supplies.

Additional Tax and Arrears

Failure to pay tax within the specified time or claiming a tax credit or refund that is not admissible can result in additional tax at a rate of 1.5% per month. Arrears may also arise from late or non-submission of returns, underpayment of tax, or disputes arising from audits or scrutiny.