Sales tax is Pakistan's version of value-added tax (VAT), governed by the Sales Tax Act 1990 and collected by the Federal Board of Revenue (FBR). It is charged at each stage of the supply chain, but businesses recover the tax they pay on inputs, so the burden ultimately falls on the final consumer. This guide covers who must register, the current rates, the STRN process, how input and output tax work, and the monthly filing calendar. For businesses weighing their overall tax position, pair it with our business tax guide.
Who must register for sales tax
Registration is mandatory for any person making taxable supplies in the course of business who falls into one of the categories below. Voluntary registration is also possible where a business wants to claim input tax or supply to registered buyers.
| Category | Registration trigger |
|---|---|
| Manufacturers | Annual turnover from taxable supplies above PKR 10 million |
| Commercial importers | All importers of taxable goods - no threshold |
| Wholesalers & distributors | Dealing in taxable goods |
| Tier-1 retailers | National chains, outlets in air-conditioned malls, large shops, or high electricity bills |
| Cottage industry | Exempt - turnover up to 10M and utility bills up to 800,000 |
A Tier-1 retailer typically means a retailer that is part of a national or international chain, operates in an air-conditioned shopping mall (excluding kiosks), has a shop of 1,000 square feet or more (2,000 for furniture), or whose cumulative electricity bill over the last twelve months exceeded PKR 1.2 million. If your business is a service provider rather than a dealer in goods, you register with your provincial revenue authority instead - see the federal vs provincial section, and our deeper GST on services guide.
Sales tax rates
The Sales Tax Act 1990 sets a single standard rate, with reduced, zero and exempt categories carved out in the schedules to the Act.
| Rate | Applies to |
|---|---|
| 18% (standard) | Most taxable goods and supplies |
| 10% / 12% (reduced) | Specified items under the Eighth Schedule |
| 0% zero-rated | Exports and goods in the Fifth Schedule - input tax refundable |
| Exempt | Goods listed in the Sixth Schedule - no tax, no input claim |
The difference between zero-rated and exempt matters: on zero-rated supplies you charge 0% but can still reclaim your input tax; on exempt supplies you charge nothing and cannot reclaim input tax at all.
How to get your STRN
Registration is done entirely online through the FBR's IRIS portal at iris.fbr.gov.pk. You need an active National Tax Number (NTN) first - if you do not have one, complete NTN registration before applying for the STRN.
| Step | What happens | Typical timing |
|---|---|---|
| 1. Log in to IRIS | Use NTN credentials; open the sales tax registration form | Same day |
| 2. Submit details | Business name, activity, bank account certificate, CNIC of owner/directors, utility details | Same day |
| 3. FBR review | Application processed and STRN issued | 7 - 14 business days |
| 4. Biometric verification | Visit a NADRA e-Sahulat centre within 30 days | Within 30 days |
Skipping biometric verification is a common trap: if you do not complete it within 30 days, your name is removed from the Sales Tax Active Taxpayers List, which blocks input tax claims by your buyers. A physical verification of the business premises may also be required in some cases.
Input tax vs output tax
This is the heart of how sales tax works, and where most first-time filers get confused.
- Output tax - the 18% you charge and collect from your customers on taxable sales.
- Input tax - the sales tax you already paid on your business purchases and imports, supported by valid tax invoices.
Each month you deduct admissible input tax from your output tax and pay the FBR the balance. Section 7 of the Act allows this adjustment, section 8 lists inputs that are not claimable, and section 8B generally caps the input tax you can claim at 90% of your output tax for the period, with the excess carried forward to the next month or refunded in eligible cases.
| Item | Amount (PKR) |
|---|---|
| Taxable sales in the month | 2,000,000 |
| Output tax at 18% | 360,000 |
| Purchases carrying input tax | 1,200,000 |
| Input tax at 18% | 216,000 |
| Net sales tax payable | 144,000 |
In this example input tax (216,000) is well under 90% of output tax (324,000), so the full amount is admissible and you pay the FBR the PKR 144,000 difference. Keep every purchase and sales invoice - input tax claims stand or fall on documentation.
Filing the monthly return
Registered persons file a sales tax return every month, even for a nil period. The standard procedure runs on a three-date rhythm for the month following the tax period:
| Deadline | Action |
|---|---|
| By the 10th | File Annexure C (sales invoices / output tax) |
| By the 15th | Deposit the payment of tax due |
| By the 18th | E-file the complete return on IRIS |
The return draws in your purchase data (Annexure A) so your suppliers' declarations must match yours - a mismatch can hold up your input tax. Some sectors, such as certain retailers, follow special or annual procedures, so confirm your category before filing.
Penalties for getting it wrong
The Act attaches specific penalties to registration and filing defaults, plus a default surcharge on late payment.
| Default | Penalty |
|---|---|
| Failure to register when required | Penalty plus recovery of the tax due |
| Failure to file the monthly return | PKR 10,000, or 5% of tax payable if higher |
| Late payment of tax | Default surcharge on the outstanding amount |
Beyond the rupee penalty, non-filing pushes you off the Sales Tax Active Taxpayers List, so your buyers lose their input tax claim on your invoices - which quietly costs you customers. Exact penalty amounts vary with the nature of the default; where a notice is involved, take advice early. See our note on tax penalties and default surcharge.
Federal vs provincial: goods vs services
A crucial distinction: sales tax on goods is federal (FBR, under the Sales Tax Act 1990), while sales tax on services is provincial. If you supply services, you register with the relevant provincial authority instead of, or in addition to, the FBR:
- Sindh - Sindh Revenue Board (SRB)
- Punjab - Punjab Revenue Authority (PRA)
- Khyber Pakhtunkhwa - KP Revenue Authority (KPRA)
- Balochistan - Balochistan Revenue Authority (BRA)
- Islamabad Capital Territory - collected by the FBR
Provincial services rates commonly sit around 13% to 16% depending on the service and province. A business supplying both goods and services may need separate federal and provincial registrations - our federal vs provincial GST guide breaks this down.
Frequently asked questions
Who must register for sales tax in Pakistan?
Manufacturers above PKR 10 million turnover, all commercial importers, Tier-1 retailers, and wholesalers or distributors of taxable goods. Cottage industry below the limits is exempt.
What is the standard sales tax rate?
18% on most goods under the Sales Tax Act 1990. Reduced rates of 10% and 12% apply to specified items, with zero-rated and exempt categories in the schedules.
When is the monthly return due?
Annexure C by the 10th, payment by the 15th, and the e-filed return by the 18th of the month after the tax period.
What is input tax and output tax?
Output tax is what you charge on sales; input tax is what you paid on purchases. You pay the FBR the difference, subject to the section 8B cap.
What if I do not file the return?
A penalty of PKR 10,000 or 5% of tax payable (whichever is higher), default surcharge on unpaid tax, and removal from the Active Taxpayers List.
Do I register with the FBR or my province?
Goods are federal (FBR); services are provincial (SRB, PRA, KPRA, BRA, or FBR for Islamabad). Some businesses need both.