If you are a provincial sales tax (PST) registered person, it’s essential to know your obligations under Section 147A of the Income Tax Ordinance, 2001. For tax year 2026, the Federal Board of Revenue (FBR) has made it mandatory for PST-registered businesses to pay advance income tax, ensuring proper compliance and preventing penalties.
Here’s an interactive guide to help businesses understand the rules.
💰 Who Is Liable to Pay Advance Tax?
Under Section 147A(1):
• Every provincial sales tax registered person must pay adjustable advance tax
• The tax is 3% of the turnover declared to the provincial revenue authority
📌 This applies to all PST-registered businesses except those already on the Active Taxpayers List (ATL) on June 30 of the previous tax year.
🗓 When to Pay Advance Tax
Under Section 147A(2):
• Advance tax must be paid monthly
• Payment coincides with the filing of your provincial sales tax return
✅ Timely payment ensures compliance and avoids penalties for late payment.
🔄 How Advance Tax Is Adjusted
• Section 147A(3): Advance tax paid can be adjusted against tax payable under Section 147
• Section 147A(5): Tax credit is allowed for the amount of advance tax paid when calculating total taxable income
• Section 147A(6): The credit is applied according to Section 4(3) rules
📌 Any unused tax credit can be refunded under Section 170 (Section 147A(7)).
⚖ Legal Effect
Under Section 147A(4):
• Advance tax due under this section is treated as tax due under an assessment order
• Non-compliance may trigger FBR recovery powers, including notices and penalties
🧠 Key Takeaways for PST-Registered Persons
• Mandatory 3% advance tax on turnover
• Pay monthly with provincial sales tax return
• Can adjust against final tax liability
• Exceptions apply for businesses on the Active Taxpayers List
• Keep records of turnover, tax paid, and credit applied for audit purposes
✅ Best Practices
✔ Calculate advance tax accurately based on turnover
✔ Pay tax on time with sales tax filings
✔ Track advance tax credits for proper adjustment
✔ Consult a tax professional if your business has cross-provincial operations
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Tax laws and FBR rules may change. Consult a qualified tax professional for guidance specific to your business.