FBR outlines the economic activities covered by the sales tax law and clarifies exclusions for employees, hobbies and private pursuits.

ISLAMABAD: The Federal Board of Revenue (FBR) has explained the meaning of ‘taxable activity’ under the Sales Tax Act, 1990 for tax year 2027, outlining the economic activities that fall within the scope of the sales tax law.

According to the Sales Tax Act, 1990, updated up to June 30, 2026, “taxable activity” means any economic activity carried on by a person, whether or not it is conducted for profit.

The definition includes an activity carried on in the form of a business, trade or manufacture.

It also covers an activity involving the supply of goods or the rendering or provision of services, or both, to another person.

A one-off adventure or concern in the nature of a trade is also treated as a taxable activity under the law.

Furthermore, anything done or undertaken during the commencement or termination of an economic activity falls within the definition.

Activities excluded from taxable activity

The FBR has also specified activities that do not constitute taxable activity.

These include services provided by an employee to an employer in the capacity of an employee.

An activity carried on by an individual as a private recreational pursuit or hobby is also excluded.

Similarly, an activity conducted by a person other than an individual is excluded if it would qualify as a private recreational pursuit or hobby had it been carried out by an individual.

What is ‘tax fraction’?

The Sales Tax Act also defines ‘tax fraction’ as an amount calculated according to the formula:

a / (100 + a)

Here, ‘a’ represents the rate of tax specified in Section 3 of the Sales Tax Act.

The definitions form part of the sales tax framework applicable for tax year 2027 under the FBR’s updated Sales Tax Act, 1990, which incorporates amendments and updates made up to June 30, 2026.