Across the Ravi from the old city, Shahdara and the roads leading out towards Sheikhupura and Gujranwala host a dense mix of small manufacturing units — cooking oil and ghee, soap and detergent, plastic goods, chemicals, packaging. For a manufacturer, sales tax isn't optional the way it can be for a small shop: manufacturers are at the centre of the sales tax system.
Manufacturers and sales tax registration
Sales tax law generally requires manufacturers to register, subject to limited exceptions for very small cottage-industry units meeting specific conditions (such as limits on turnover and electricity load). Most units with machines, workers and regular sales to distributors are expected to be registered.
How input and output tax work
| Step | What happens |
|---|---|
| You buy raw materials from registered suppliers | You pay sales tax on purchases (input tax) |
| You sell finished goods | You charge sales tax on sales (output tax) |
| Monthly return | You pay output tax minus admissible input tax |
| Purchases from unregistered suppliers | No input tax credit; possible further tax |
Your input claims depend on your suppliers filing correctly — FBR's systems match invoices. A supplier who doesn't declare the sale can cost you your input claim.
Industrial electricity
Industrial connections carry sales tax and advance income tax on bills. Sales tax on electricity used in manufacturing may be claimable as input tax, subject to the rules. Keep every bill.
Raw material and finished goods stock
| Stock | Record |
|---|---|
| Raw materials (oil, chemicals, resin) | Purchases, issues to production, closing quantity |
| Work in progress | Estimated at year end |
| Finished goods | Production, sales, closing quantity |
A manufacturer's books must connect raw materials consumed to finished goods produced. Implausible yields — too little raw material for the output declared — attract questions.
Income tax
The factory's profit is taxed in the hands of the owner, AOP or company. Advance taxes collected at import of raw materials, on electricity and by buyers on supplies are credits. Minimum-tax provisions on turnover may apply.
Workers
Factory workers bring EOBI, social security, and — for larger units — workers' welfare and profit participation obligations. See factory staff obligations.
Get your unit's registration, invoicing and monthly returns right before chasing large buyers. Distributors and chains will only buy from manufacturers whose sales tax invoices work in FBR's system.
Branded vs unbranded goods
Branded packaged goods often face stricter documentation and, in some product categories, retail-price-based sales tax. Check the treatment for your products.
Packaging and labelling
Branded consumer goods need packaging material bought from printers and converters — another input with sales tax to claim. Keep packaging stock in the same register as raw materials.
Shahdara — questions we get asked
File without taking a day off
Our team works online from our Awan Town office, so you never have to visit or queue. Documents on WhatsApp, receipt back on WhatsApp.