Who Can Charge Sales Tax in Pakistan? Rates, Invoices and Verification

Sales tax is an indirect tax collected from customers and paid to the government by businesses that are legally required and authorized to collect it. In Pakistan, a seller cannot lawfully add sales tax to an invoice merely because it has an NTN. The seller must hold a valid sales tax registration for the relevant activity.

The rules also depend on what is being sold. The Federal Board of Revenue (FBR) administers sales tax on goods under the Sales Tax Act, 1990. Sales tax on services is generally administered by the relevant provincial or territorial revenue authority.

Last reviewed: October 2026.

Who Can Charge Sales Tax in Pakistan?

A person may charge sales tax only when that person is registered with the authority responsible for the taxable supply.

• Goods: A supplier registered with FBR may charge federal sales tax on taxable goods.
• Services: A service provider must be registered with the relevant authority, such as PRA, SRB, KPRA, BRA or the authority administering sales tax on services in Islamabad Capital Territory.

An NTN is not the same as a Sales Tax Registration Number (STRN). An NTN identifies a person for income tax purposes. It does not, by itself, authorize the person to collect sales tax.

What Is the Standard Sales Tax Rate?

Under section 3 of the Sales Tax Act, 1990, the standard federal sales tax rate on taxable goods is 18%. The same standard rate generally applies to taxable imports.

This does not mean every good is taxed at 18%. Some goods are exempt, zero-rated, taxed at a reduced or higher rate, or governed by a special schedule or notification. The correct treatment depends on the product, tariff classification, transaction and applicable law.

Rates for services are not uniform across Pakistan. Each provincial or territorial law contains its own rates, exemptions and special regimes. A business providing services must check the law for the jurisdiction in which the service is taxable.

What Is Further Tax?

Section 3(1A) of the Sales Tax Act generally imposes 4% further tax when taxable goods are supplied to a person who is not registered or is not an active taxpayer for sales tax purposes. Exceptions can apply to supplies specified by law or notification.

Further tax is collected in addition to the normal sales tax. It is primarily a supplier-level compliance rule and should not be applied mechanically without checking the buyer’s status and the relevant exclusions.

Example

A registered wholesaler sells taxable goods worth Rs. 100,000 to an unregistered buyer. If the standard 18% rate and 4% further tax both apply, the invoice may show Rs. 18,000 as sales tax and Rs. 4,000 as further tax. The total becomes Rs. 122,000.

If an exclusion applies, the further tax calculation may be different. The supplier should confirm the current legal treatment before issuing the invoice.

How Sales Tax Works

A registered supplier charges output tax on taxable sales. Subject to the law, the supplier may claim admissible input tax paid on business purchases. The difference is normally paid to the government through the sales tax return.

Example

A registered manufacturer charges Rs. 180,000 sales tax on its taxable sales during a month. It has Rs. 110,000 of admissible input tax supported by valid invoices. Subject to all adjustment rules and restrictions, the net amount is Rs. 70,000.

The customer ultimately bears the economic cost where the tax is included in the final price and no input adjustment is available to that customer.

What Must a Valid Sales Tax Invoice Show?

A registered supplier making a taxable supply must issue a proper tax invoice. Depending on the transaction and applicable rules, the invoice should normally show:

• the supplier’s name, address and STRN;
• the customer’s details and registration number where required;
• a unique serial number and invoice date;
• a clear description and quantity of the goods or services;
• the value before tax;
• the applicable sales tax rate and amount;
• further tax or other applicable tax shown separately; and
• the total invoice value.

A handwritten sales tax amount, an NTN alone, or a vague receipt without the supplier’s sales tax details should be treated as a warning sign.

How to Verify a Seller’s Sales Tax Status

Do not rely only on the number printed on an invoice. Verify the seller through the official FBR system when the supply concerns goods.

1. Open the FBR IRIS portal or the FBR Active Taxpayer List for Sales Tax.
2. Select the sales tax taxpayer-status or profile inquiry option.
3. Enter the supplier’s registration details exactly as shown on the invoice.
4. Confirm that the business name matches the seller.
5. Check whether the registration is active for the relevant period.

For services, use the verification facility of the relevant provincial or territorial revenue authority.

Income Tax ATL status and Sales Tax ATL status are different. A person can be active for income tax but not authorized to charge sales tax.

Common Warning Signs

• The seller shows only an NTN and no STRN.
• The business name on the invoice does not match the verified registration.
• The invoice has no serial number or date.
• Sales tax is included as a round figure without showing the rate and taxable value.
• The seller asks for tax in cash but refuses to issue a proper invoice.
• The seller uses another business’s registration number.
• The registration is suspended, inactive or not valid for the relevant supply.

What If an Unregistered Seller Charges Sales Tax?

An unregistered person is not permitted to recover sales tax from customers as if it were a registered supplier. Section 3B also requires amounts collected as tax when they were not payable, or collected in excess, to be paid to the Federal Government.

If you suspect improper collection:

1. Ask for a complete tax invoice.
2. Keep the invoice, payment evidence and seller’s details.
3. Verify the registration through the official authority.
4. Raise the issue with the seller in writing.
5. Report the matter to FBR or the relevant provincial authority when necessary.

Use current contact details published on the authority’s official website. Contact channels can change, so avoid relying on old email addresses or phone numbers copied from outdated articles.

Goods and Services: Do Not Mix the Two Systems

A frequent mistake is to apply the federal rules for goods to a service invoice. Pakistan has separate sales tax systems.

Example: A business selling computer equipment may fall under the federal sales tax system for goods. The same business providing consultancy or maintenance services may also have obligations under provincial or territorial sales tax law. Registration and invoicing should be reviewed separately for each activity.

Frequently Asked Questions

Can a business charge sales tax using only an NTN?

No. An NTN alone does not authorize a business to collect sales tax. The supplier needs the appropriate sales tax registration for the supply.

Is the sales tax rate always 18%?

No. Eighteen percent is the standard federal rate for taxable goods, but exemptions, zero-rating, special schedules and different rates can apply. Services are governed by separate provincial or territorial rules.

Is further tax still 3%?

No. The general further-tax rate under section 3(1A) is 4% where it applies. The old 3% rate is outdated.

Can an inactive sales tax registrant issue a tax invoice?

An inactive or suspended status creates serious compliance concerns. The buyer should verify the seller’s current status and seek advice before claiming input tax.

Can a customer claim input tax on any receipt?

No. Input tax is subject to statutory conditions, restrictions and documentary requirements. A proper invoice from an eligible registered supplier is essential, but it does not automatically make every amount adjustable.

Who regulates sales tax on services?

The relevant provincial or territorial authority regulates sales tax on services. The correct authority depends on the nature and place of the service.

Need Help With Sales Tax Registration or Compliance?

Incorrect registration, invoicing or tax treatment can lead to disallowed input tax, penalties and disputes. We can review your activities, identify the relevant authority, verify the applicable rate and help you meet your registration and filing obligations.

Contact 4SYTE for a practical sales tax compliance review.