People loosely call it "GST", but Pakistan does not have a single, unified goods and services tax. After the 18th Amendment devolved services taxation to the provinces, the country runs two parallel sales tax systems. If you sell goods, you deal with the Federal Board of Revenue (FBR). If you provide services, you deal with your province's revenue authority. Getting this split wrong is one of the most common reasons businesses face notices and disallowed input tax. This guide sets out exactly who taxes what, the current rates, and how to register correctly. For a broader view, see our complete guide to tax in Pakistan.
The federal vs provincial split
The dividing line is simple in principle: goods are federal, services are provincial. The Constitution, as amended by the 18th Amendment in 2010, gave the provinces the exclusive right to tax services within their territory. Everything else - goods manufactured, imported or supplied - stays with the federal government.
| What is taxed | Who collects | Governing law |
|---|---|---|
| Goods (supply and import) | FBR | Sales Tax Act, 1990 |
| Services in Punjab | PRA | Punjab Sales Tax on Services Act, 2012 |
| Services in Sindh | SRB | Sindh Sales Tax on Services Act, 2011 |
| Services in KP | KPRA | KP Finance Act, 2013 |
| Services in Balochistan | BRA | Balochistan Sales Tax on Services Act, 2015 |
| Services in Islamabad (ICT) | FBR | ICT (Tax on Services) Ordinance, 2001 |
Note the exception: Islamabad Capital Territory is not a province, so services there are still taxed federally by the FBR under the 2001 Ordinance - not by any provincial authority.
Federal sales tax on goods (FBR)
The FBR administers sales tax on goods under the Sales Tax Act 1990. The standard rate is 18%, applied to the value of taxable supplies and imported goods. Some items sit outside the standard rate:
- Zero-rated (0%) - mainly exports and certain specified supplies, where input tax is still refundable.
- Exempt - goods listed in the Sixth Schedule, on which no output tax is charged and no input tax is claimable.
- Reduced and fixed rates - specific sectors and retailers taxed under special SROs and schedules.
Federal sales tax works on the input-output model: you charge output tax on sales, deduct input tax paid on purchases, and pay the FBR the difference through a monthly return. For registration thresholds, rates and the return cycle, read our dedicated guide to sales tax registration, rates and returns.
Provincial sales tax on services
Each province runs its own authority, law, rate card and return. The standard rates as they currently stand:
| Province / territory | Authority | Standard rate | Telecom rate |
|---|---|---|---|
| Punjab | PRA | 16% | 19.5% |
| Sindh | SRB | 15% | 19.5% |
| Khyber Pakhtunkhwa | KPRA | 15% | 19.5% |
| Balochistan | BRA | 15% | 19.5% |
| Islamabad (ICT) | FBR | 15% | 19.5% |
Beyond the standard rate, each authority publishes a Second Schedule of reduced rates - often 3% to 8% - for eligible sectors such as construction, freight transport, call centres, IT support and hospitality, usually offered without input tax adjustment. Rates and the reduced-rate lists change with each provincial Finance Act, so always confirm the current figure for your exact service before invoicing.
Who registers where
Your registration follows what you supply, not where your office is. A common trap is assuming one registration covers everything:
- Sell goods only - register with the FBR for federal sales tax.
- Provide services only - register with the provincial authority where the service is delivered or consumed (PRA, SRB, KPRA or BRA), or the FBR for Islamabad.
- Both goods and services - you need separate registrations with the FBR and the relevant provincial authority.
- Operate across provinces - a firm providing services in both Punjab and Sindh may need to register with both the PRA and the SRB, and file returns with each.
Before any of this, you will need a National Tax Number. See our NTN registration guide and the new business tax registration checklist to get set up in the right order.
Common pitfalls and place of supply
Because two systems overlap, disputes usually turn on classification and place of supply:
- Goods or service? - some transactions (software, catering, works contracts) can fall on either side. Misclassify and you pay the wrong authority, leaving the correct one still owed.
- Which province? - service tax generally follows where the service is rendered or the recipient is based. Cross-province work can trigger competing claims from two authorities.
- Input tax adjustment - cross-adjustment of input tax between the FBR and provincial authorities is restricted and depends on reciprocal arrangements. Do not assume federal input tax offsets a provincial output liability.
- Withholding - registered recipients are often required to withhold service tax on payments to unregistered or out-of-province providers.
If your business straddles goods and services or operates in more than one province, treat sales tax as two problems, not one. A short consultation can prevent double taxation and disallowed input claims that surface only when a notice arrives. See our note on FBR tax notices.
Frequently asked questions
What is the difference between GST on goods and services in Pakistan?
Goods are taxed federally by the FBR under the Sales Tax Act 1990 at a standard 18%. Services are taxed provincially by the PRA, SRB, KPRA and BRA at 13% to 16%, while the FBR collects on services in Islamabad.
What is the standard rate of sales tax on services?
Punjab (PRA) charges 16%; Sindh, KP, Balochistan and Islamabad charge 15%. Telecom is generally higher at 19.5%, and many sectors have reduced rates of 3% to 8%.
Who collects service tax in Islamabad?
The FBR, under the Islamabad Capital Territory (Tax on Services) Ordinance 2001. Islamabad is not a province, so provincial authorities do not apply there.
Do I register with both the FBR and a provincial authority?
If you supply both goods and services, yes. Goods go to the FBR; services go to the relevant provincial authority. Operating across provinces can mean multiple provincial registrations.
Can I adjust input tax across the two systems?
Not automatically. Cross-adjustment between the FBR and provincial authorities is restricted and depends on reciprocal arrangements, so take advice before claiming.