Karachi, December 16, 2024 – The Federal Board of Revenue (FBR) has issued a detailed list of goods eligible for zero-rating of sales tax for the tax year 2025.
This development aligns with Section 4 of the updated Sales Tax Act, 1990, which specifies the categories of goods entitled to this concession.
Zero-Rating of Sales Tax: Key Provisions
According to the FBR, the following goods will be subject to a zero percent sales tax rate, notwithstanding the provisions of Section 3, except for sub-section (1A):
1. Exported Goods and Fifth Schedule Items
o Goods exported out of Pakistan or specified in the Fifth Schedule of the Sales Tax Act, 1990, will qualify for zero-rating.
2. Supplies for Conveyances
o The supply of stores and provisions for consumption aboard conveyances proceeding to destinations outside Pakistan, as specified under Section 24 of the Customs Act, 1969 (IV of 1969), is included.
3. Goods Specified by Federal Government Notifications
o The Federal Government may designate additional goods for zero-rating through notifications in the official Gazette, particularly in circumstances requiring immediate action. These include situations related to national security, natural disasters, national food security in emergencies, or the implementation of bilateral and multilateral agreements.
Conditions and Restrictions
The FBR has clarified that zero-rating will not apply in the following cases:
• Re-imported Goods
o Goods exported but intended to be re-imported into Pakistan are excluded.
• Unexported Goods
o Goods entered for export under Section 131 of the Customs Act, 1969, but not actually exported, do not qualify.
• Exports to Specific Countries
o Goods exported to countries specified by the Federal Government via notification in the Gazette are also excluded.
Additionally, the Federal Government reserves the right to restrict the credit for input tax paid and claimed by individuals making zero-rated supplies of goods otherwise subject to sales tax.
FBR’s Focus on Compliance
The FBR has reiterated its commitment to ensuring compliance with the updated Sales Tax Act. By clearly defining the criteria and limitations for zero-rated goods, the FBR aims to streamline the process and prevent misuse of this facility. Officials encourage taxpayers to stay informed and adhere to these provisions to avoid potential penalties.
With these measures, the FBR underscores its role in balancing tax concessions with national economic interests and regulatory compliance.