Karachi, November 13, 2023 – The Federal Board of Revenue (FBR) has announced the sales tax rates for the tax year 2024 through the updated Sales Tax Act, 1990, effective from July 1, 2023.
The comprehensive legislation outlines the rates and conditions applicable to various transactions and entities, aiming to streamline the taxation system and enhance revenue collection.
According to the Sales Tax Act, 1990, sales tax will be charged, levied, and paid at the rate of eighteen percent of the value of taxable supplies made by a registered person in the course or furtherance of any taxable activity. Additionally, goods imported into Pakistan, regardless of their final destination within the country, will also be subject to an eighteen percent sales tax.
In cases where taxable supplies are made to an unregistered person or an inactive taxpayer, a further tax of four percent of the value will be charged. However, the Federal government has the authority to specify, through official Gazette notifications, taxable supplies exempted from this additional tax.
The Act introduces specific provisions for goods specified in the Tenth Schedule. The tax on these goods will be levied based on production capacity or on a fixed basis, with different rates for different regions or areas. The Act also addresses the taxation of goods specified in the Third and Eighth Schedules, with rates determined by retail prices and conditions specified in the Schedules.
Furthermore, the liability to pay the sales tax rests with the person making the supply in the case of goods and the person importing the goods. However, the FBR, with the approval of the Federal Minister-in-charge, has the authority to specify certain goods where the liability to pay tax shifts to the person receiving the supply.
Notably, the Act outlines the tax rates and procedures for goods specified in the Ninth Schedule, giving the Federal Government flexibility to levy and collect additional tax at rates not exceeding eighteen percent of the value of goods or class of goods.
The Act also introduces provisions related to withholding tax, requiring any person or class of persons acting as purchasers of goods or services to withhold tax at rates specified in the Eleventh Schedule. Online marketplaces facilitating the sale of third-party goods are designated as withholding agents for tax on taxable supplies.
In a unique provision concerning the supply of natural gas to CNG stations, the Gas Transmission and Distribution Company is mandated to charge sales tax at the rate of eighteen percent of the value of supply to CNG consumers.
The Act introduces specific provisions for Tier-1 retailers, specifying their sales tax rates and emphasizing the integration of retail outlets with the FBR’s computerized system for real-time reporting of sales. Additionally, it addresses the minimum production for certain goods specified in the Thirteenth Schedule.
Moreover, the Board has the authority to require certain classes of persons to integrate their invoice-issuing machines with the Board’s Computerized System for real-time reporting of sales.
The Federal Government also reserves the right to levy and collect additional amounts of tax from retailers, excluding Tier-1, through their monthly electricity bills, with rates specified in notifications in the official Gazette.
The unveiling of these tax rates underlines the government’s commitment to refining the taxation system, promoting transparency, and ensuring a fair and efficient revenue collection mechanism. Businesses and individuals are advised to familiarize themselves with the updated provisions to ensure compliance with the new tax regulations.
