What is Sales Tax in Pakistan?

Sales tax in Pakistan is a federal tax levied on the supply of goods at the standard rate of 18% under the Sales Tax Act, 1990. Businesses registered for sales tax must collect this tax from their customers and pay it to FBR after deducting their input tax (sales tax they paid on purchases).

Sales tax returns must be filed monthly — this is one of the most compliance-critical requirements for Pakistani businesses. Missing even one monthly return triggers automatic penalties.

Sales Tax Registration — Who Must Register?

  • Manufacturers with annual turnover above Rs. 10 million
  • Importers of goods (mandatory regardless of turnover)
  • Retailers and distributors above threshold (Tier-1 retailers must register)
  • Exporters (register to claim input tax refunds)
  • Service providers in provinces where FBR has jurisdiction
  • Any business required by a supply chain to be registered

Sales Tax Rates Pakistan 2026

CategoryRateExamples
Standard Rate18%Most manufactured goods, commercial supplies
Reduced Rate10%Certain food items, agricultural inputs
Reduced Rate5%Specific machinery, medical equipment
Zero Rate0%Exports (eligible for input tax refund)
ExemptNilBasic foodstuffs, medicines, educational materials

Monthly Sales Tax Return — Filing Process on FBR IRIS

  • Step 1: Login to FBR IRIS portal (iris.fbr.gov.pk) with your sales tax credentials
  • Step 2: Navigate to Returns > Sales Tax Return > Select relevant tax period
  • Step 3: Enter all sales (output tax) made during the month with invoice details
  • Step 4: Enter all purchases (input tax) with valid tax invoices from registered suppliers
  • Step 5: System calculates: Output Tax minus Input Tax = Net Tax Payable
  • Step 6: Generate Payment Slip ID (PSID) and pay net tax at any bank before the 18th
  • Step 7: Submit the return after payment is confirmed

Deadline: Monthly sales tax return must be filed AND payment made by the 18th of each following month. Never miss this deadline — penalties are automatic and significant.

Penalties for Late Sales Tax Return

ViolationPenalty
Late filing of returnRs. 10,000 per return or 5% of tax, whichever is higher
Late payment of taxDefault surcharge: KIBOR + 3% per annum
Non-filing for 3+ monthsSuspension of sales tax registration
Fraudulent invoices / fake input claimsPenalty up to 3x the tax amount + criminal prosecution

Frequently Asked Questions

When is the deadline for monthly sales tax return in Pakistan?
The monthly sales tax return must be filed and payment made by the 18th of the following month. For example, June's return is due by July 18.
What is the standard sales tax rate in Pakistan 2026?
The standard sales tax rate is 18%. Reduced rates of 5% and 10% apply to specific categories. Exports are zero-rated and exempt items have no tax.
What is the difference between input tax and output tax?
Output tax is the sales tax you charge and collect from your customers on sales. Input tax is the sales tax you pay to your suppliers on purchases. Net tax payable = Output Tax - Input Tax. If input exceeds output, you may claim a refund.
Can I claim a refund if my input tax exceeds output tax?
Yes. If you have excess input tax (common for exporters), you can claim a refund from FBR. The refund process requires proper documentation of all input tax invoices and may take several weeks to months.

Sales Tax Filing Made Simple

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