As of November 2025, across the jurisdiction of the Federal Board of Revenue (FBR) in Pakistan, the sales tax rate stands at 18% for the majority of taxable goods and services under the Sales Tax Act of 1990, which remains the case. The Finance Act of 2025 confirmed that the rate would remain unchanged and enhance compliance while the Finance Act of 2019 confirmed that the rate would remain unchanged. There do exist exceptions at the provincial, sectoral, and specific goods levels (e.g., zero-rated exports, essentials may have reduced rates, etc). For the most relevant details, and in regard to your tax planning, your best bet would be Fataxation.com, which will break it down for you, and assist you to archive provincial sales tax on services, exemptions and filing.
- Standard Federal Sales Tax Rate (Goods)
- General Rate: 18% on the value of taxable supplies (e.g., manufactured goods, imports).
- Applies to: Locally manufactured or imported goods unless specified otherwise.
- Calculation: Sales Tax = Value of Supply × 18%.
- Reduced Rates (Key Examples from FBR’s Eighth Schedule):
- 17%: Certain agricultural machinery and tractors.
- 16%: Newsprint and unprocessed food items like fresh fruits/vegetables.
- 10%: Stationery, books, and some pharmaceuticals.
- 5%: Basic food staples (e.g., wheat flour, rice) and energy-efficient appliances.
- Zero-Rated Supplies: 0% for exports, IT services, basic healthcare supplies.
- Exempt Supplies: Unprocessed agricultural produce, educational books, and certain medical equipment are also sales tax exempt (see full list in Eleventh Schedule).
Why No Change in 2025? The focus of the Finance Act 2025 (passed June 2025) remained on digital invoicing and filer incentives, leaving the tax rates unchanged. This decision was to enable the government to collect PKR 9.4 trillion targeted for FY 2025-26 and to allow the government to avoid any further burden on consumers due to inflation.
Provincial Sales Tax on Services (PST)
Following the 18th Amendment, Pakistan’s provinces can levy sales tax on services and it is collected through Provincial Revenue Authorities: PRAP (Punjab), SRA (Sindh), KPRA (Khyber Pakhtunkhwa), and SRB (Balochistan). This is also collected separately from the federal goods tax and is typically in line with the 18% rate.
Province Standard PST Rate (2025)Key Notes/ReductionsPunjab16%5% on restaurant services; 10% on telecom; exemptions for healthcare/education.Sindh13% (general)5% on goods transport; higher 16% for clubs/hotels; Karachi-specific rebates. Khyber Pakhtunkhwa15%5% for IT exports; zero for charitable services.Balochistan15%aligned with KP; reduced 10% for mining services. Islamabad Capital Territory17%Federal-aligned; 16% for professional services.
Inter-Provincial Supplies: Use the destination-based principle—taxed at the buyer’s province rate.
2025 Updates: Alongside the provincial budgets, Punjab’s June 2025 budget also introduced 1-2% rate increases for luxury services while keeping essential services low to aid SMEs.
Input Tax Credit (ITC) and Refunds:
Registered taxpayers claiming ITC for Input purchases attaining 18% (or applicable rate) against computed Output Tax is a common practice in claiming ITC. Tax payment is lower when Input Tax Credit is applicable.
Input Tax Credit is Refundable to Zero Rated Exporters:
As for zero-rated exporters, refunds can be claimed in the FBR FASTER system within a period of 6 months, while 2025 marked the year for refunds to be processed in 30 days for compliant exporters.
Common Mistake:
Non-filers will pay the full 18% tax without ITC, and in addition, the penalties for tax evasion (which can be as high as 25%).
Filing Sales Tax in 2025:
If you have a turnover greater than 5 million PKR, you can register to obtain the ST Registration Number in FBR IRIS portal.
Sales tax is filed per month for completed quarters, as by the 15 and 20th of the next month through the portal. You can use the sales tax calculator for a simplified tax computation.
Compliance:
Retailers with a turnover of 10 million PKR are expected to invoice through the tax-compliant POS system.
Penalties for Tax Filing:
There is a 0.1% penalty for each day a return is filed late, and a 50% penalty of the tax due is not reported. If you deal with taxable goods that you sell for 100,000 PKR (which are 18% taxed goods), the tax for that sale will be 18,000 PKR.
If your inputs amounted to 60,000 and the ITC was 10,800, your net payable tax is 7,200 PKR.
Has the sales tax rate increased in Budget 2025? No, there are no major hikes expected as enforcement via the Track & Trace system will take center stage.
The info is based on the latest Finance Act 2025 and FBR circulars (e.g, C.No. 1/ST/2025). For real-time updates, check FBR.gov.pk- rates can change with mid-year amendments. If you’re filing for FY 2025-26, download the official Sales Tax Return form from IRIS.