Pakistan splits sales tax between two levels of government. FBR charges sales tax on goods under the Sales Tax Act, 1990, at a standard rate of 18%. The provincial revenue authorities charge sales tax on services under their own laws. A business that sells both goods and services, or provides services in more than one province, may need to register with more than one authority. This guide explains who taxes what, how registration and monthly returns work, and what e-invoicing means for your business.
Who taxes what
The split comes from the 18th Constitutional Amendment, which left sales tax on services with the provinces.
| FBR (federal) | Provincial authorities | |
|---|---|---|
| What is taxed | Goods imported, manufactured or supplied in Pakistan, plus certain services the federal law covers | Services provided in the province |
| Law | Sales Tax Act, 1990 | Each province's sales tax on services law |
| Authority | Federal Board of Revenue | Punjab Revenue Authority (PRA), Sindh Revenue Board (SRB), Khyber Pakhtunkhwa Revenue Authority (KPRA), Balochistan Revenue Authority (BRA) |
| Rate | Standard rate 18%; some goods are reduced-rate or exempt | Varies by province and by type of service |
| Returns | Monthly, on IRIS | Monthly, on each authority's own portal |
Services provided in the Islamabad Capital Territory fall under a separate territory law. Check which authority applies before you register.
Sales tax on goods (FBR)
Rate
The standard rate is 18% and applies to most taxable goods. Some goods are charged at reduced rates or are exempt under the Act's schedules and FBR notifications (SROs). Petroleum products have their own rates. Always check the rate for your specific product rather than assuming the standard rate applies.
How the tax works: output and input tax
FBR sales tax works like a value-added tax:
- Output tax is the sales tax you charge on your sales.
- Input tax is the sales tax you pay on purchases used for your taxable supplies.
- Net payable = output tax − input tax. If input tax is higher, the excess can be carried forward, or refunded if you meet the conditions.
You can only claim input tax if you hold proper sales tax invoices for your purchases.
Registration
Registration gives you a Sales Tax Registration Number (STRN), linked to your National Tax Number (NTN). You apply online through FBR's IRIS portal once you have an NTN. Typical documents include:
- CNIC of the proprietor, partners or directors
- proof of your business address (rent agreement or ownership documents)
- a bank account certificate or statement
- utility bills for the business premises
- partnership deed (AOPs) or memorandum and articles of association (companies)
- a digital photograph
Whether you must register depends on the type of business you run, such as manufacturer, importer or retailer, and on thresholds that change through Finance Acts. Our source articles gave figures that we could not confirm as current, so we don't quote a threshold here. Check FBR's current rules or ask an adviser. Businesses below the threshold can register voluntarily, which lets them claim input tax.
Monthly return and payment
Registered persons file a sales tax return every month on IRIS. The return reports sales, purchases, output tax, input tax and the net amount payable. The tax due must be paid by the 15th of the following month. For example, tax for January 2026 is due by 15 February 2026. Confirm the return's own filing date on IRIS each month, especially if the 15th falls on a holiday or FBR has issued an extension.
Sales tax on services (provincial authorities)
Each province sets its own rates, exemptions, registration rules and return deadlines, and changes them in its annual budget. Rates also differ between types of service within the same province. We don't list provincial rates here because the figures in our sources disagreed. Check the rate for your service category on the relevant authority's website, such as pra.punjab.gov.pk for Punjab or srb.gos.pk for Sindh.
Points that catch businesses out:
- Several provinces: if you provide taxable services in more than one province, you may need to register with each authority involved.
- Mixed supplies: where goods and services are bundled together, deciding which authority has the right to tax the supply can be complicated. Take advice on how to split it.
- No cross-adjustment by default: input tax paid on services (provincial) generally can't be set off against output tax on goods (FBR), or the other way round, except where specific rules allow it.
Freelancers and online service businesses
If you sell services online, such as web development, digital marketing, design, consulting or online courses, your sales tax obligation, if any, is provincial, not federal. Register and comply with the rules of the province where your services are supplied or consumed, if you meet that province's criteria. Income tax is a separate matter: see our freelancer and IT export guide and, for online sellers of goods, the e-commerce tax guide.
What about "SRO 345(I)/2026" on digital services?
An earlier article on this site described "FBR SRO 345(I)/2026" as a new sales tax regime for digital services. That article itself said the SRO was speculative and "not yet an established order". We have found no confirmation that any such SRO has been issued, so don't rely on descriptions of its contents. If you pay for foreign digital services, such as software or ads, with a card, a different tax may apply; see our guide to section 236Y.
E-invoicing and digital records
FBR is steadily moving sales tax compliance onto digital systems:
- Tier-1 retailers have to integrate their point-of-sale systems with FBR so that each sale is reported in real time. Our POS integration guide covers who is affected and how to integrate.
- Other registered businesses should expect electronic invoicing requirements to spread. Check whether an FBR notification already covers your category. Even if none does yet, choose accounting or invoicing software that can meet FBR's data formats.
A sales tax invoice should show at least:
- the supplier's name, address and NTN
- the buyer's name, address and NTN, for business-to-business sales
- the date of issue
- a description of the goods or services, the quantity and the unit price
- the value of the supply
- the sales tax charged
- the total amount payable
Keep sales, purchase and invoice records, returns and bank statements for six years. They support your input tax claims and are what FBR will ask for in an audit.
Penalties for non-compliance
Both FBR and the provincial authorities penalise sales tax defaults. Possible consequences include:
- a penalty for filing a return late
- additional tax (default surcharge) on tax paid late
- suspension or blocking of your registration if you don't file
- penalties for failing to issue proper tax invoices
- large penalties for concealing or under-reporting sales, and prosecution in serious cases
Our sources quoted different penalty amounts, so check the current amounts in the Sales Tax Act or the relevant provincial law.
Frequently asked questions
What's the difference between FBR sales tax and provincial sales tax?
FBR taxes goods: imported, manufactured or supplied. The provincial authorities (PRA, SRB, KPRA and BRA) tax services provided in their province.
Do I need to register with more than one authority?
Possibly. If you supply taxable goods, register with FBR. If you also provide taxable services, register with each province where you provide them.
What's the standard FBR sales tax rate in 2026?
18% on most taxable goods. Some goods are reduced-rate or exempt, so check the rate for your product.
Can I offset provincial input tax against FBR output tax?
Generally not, because the two taxes sit with different authorities. Some specific cross-adjustments are allowed under particular conditions. Take advice before you claim one.
When is sales tax payable?
By the 15th of the month following the tax period. Check IRIS for the return filing date.
This is general information, and tax rules change often. Check FBR's current notifications or ask a tax adviser about your own case.