Constitutional court overturns LHC ruling, says exempt poultry farmers cannot be compelled to register for sales tax
The Federal Constitutional Court (FCC) has ruled that poultry farmers are not legally required to obtain sales tax registration, holding that their activities are already exempt from sales tax under the Sales Tax Act, 1990.
In a judgment issued by a two-member bench comprising Justice Aamer Farooq and Justice Muhammad Karim Khan Agha, the court overturned a Lahore High Court ruling dated December 4, 2025, providing relief to poultry farmers and poultry feed manufacturers involved in the litigation.
The appeals were filed by Shahzor Feeds (Pvt.) Ltd and other petitioners challenging the interpretation of sales tax registration requirements under the existing legal framework.
The court held that poultry farmers fall within a category specifically exempt from sales tax and, therefore, are not obligated to register under the sales tax regime. Consequently, no additional tax or related penalties can be imposed on them solely because they remain unregistered.
“In the present case, poultry farmers are exempted from payment of sales tax under the law; therefore, they are not required to be registered,” the judgment stated.
The bench further observed that non-registration by exempt persons is expressly permitted under Section 14 of the Sales Tax Act, 1990, and therefore cannot give rise to additional tax liabilities or adverse legal consequences.
The dispute arose from an order issued on September 11, 2024, by the Commissioner Inland Revenue at the Large Taxpayers Office (LTO), Lahore. The tax authority had ruled that poultry feed manufacturers supplying feed to unregistered poultry farmers were liable to pay additional tax under Section 3(1A) of the Sales Tax Act.
The affected parties challenged the decision before the Lahore High Court, which upheld the tax department’s position. However, the Federal Constitutional Court has now reversed that ruling.
According to the judgment, imposing additional tax on feed manufacturers solely because they supplied products to exempt poultry farmers would ultimately increase costs for farmers and would be inconsistent with the structure and intent of the sales tax law.
The court noted that there was no dispute regarding the statutory sales tax exemption available to poultry farmers. While poultry feed manufacturers were supplying products to unregistered persons, the law does not require exempt persons to obtain sales tax registration.
The bench emphasized that Section 14 of the Sales Tax Act applies only to persons making taxable or zero-rated supplies. Since poultry farmers are engaged in exempt activities, they do not fall within the category of persons required to register.
Referring to Sections 14 and 2(41) of the Sales Tax Act, 1990, the court concluded that individuals and businesses exempt from sales tax are not obligated to register under the sales tax system. As a result, suppliers cannot be subjected to additional tax merely because their customers are exempt and unregistered poultry farmers.
The ruling is expected to provide clarity on the application of sales tax laws to the poultry sector and may reduce compliance-related disputes involving poultry farmers and feed manufacturers in the future.
