Introduction to Sales Tax in Pakistan

Sales tax comes under the category of indirect taxes which is levied on the sale of goods and services.The revenue generated by collecting this tax goes directly to the government and the government then spends it for the welfare of its country.

Every business that wants to register for sales tax must first register with FBR.

This tax is mostly shifted to consumers, as businesses pay this tax by collecting it from their customers.

This article can prove to be very informative for you. In this article, we will discuss the rules, rates, and registration process of sales tax in detail.

What is Sales Tax?

Sales tax comes under the category of indirect tax.The government collects this tax from the business but the business shifts this tax to its customers.In Pakistan, this tax is collected by the Federal Board of Revenue (FBR).

This tax is levied at every stage of the business such as manufacturing, distribution, and retail, but in the end, this tax has to be paid by the customer like us.The rates and rules of sales tax change according to the regulation of the government.

Types of Sales Tax in Pakistan

There are many different types of sales tax which are an important part of the government’s revenue. These are some of the important types:

• General Sales Tax (GST)
• Value-Added Tax (VAT)
• Retail Sales Tax
• Federal Excise Duty (FED)
• Provincial Sales Tax (PST)

Sales Tax Registration in Pakistan

If your business is of such a type that you sell taxable goods and services, then you must register with FBR.

This registration gives you a Sales Tax Number (STRN), after which your business becomes legal and tax compliance is ensured.

Sales Tax Registration Method:

• Sign up on FBR IRIS Portal – Create an account on iris.fbr.gov.pk.
• Upload required documents – CNIC, business details, bank statement, and lease agreement (if required).
• Submit application – Apply online by filling the forms.
• Verification Process – FBR will verify the documents and if everything is fine, it will issue STRN.

benefits:

• Legal business operations
• Ease of claiming input tax credit
• Large business network and trust is built

How Businesses Handle Sales Tax in Pakistan

In Pakistan, people follow certain steps to manage sales tax.

This tax is collected from customers like us.

1. Sales Tax Collection

Businesses charge this tax from their customers as much as it is applicable on the product purchased by the customer.

This tax is clearly mentioned in the invoice.

2. Sales Tax Filing & Payment

Sales tax return has to be filed every month on FBR IRIS portal.

3. Input Tax Credit (ITC)

Registered businesses keep a record of their purchases’ tax invoices.

4. Compliance & Audits

FBR also audits businesses from time to time.

Common Sales Tax Issues in Pakistan

While managing sales tax, businesses face some issues which we have mentioned below:

1. Late Sales Tax Filing

• Many businesses do not file tax on time and later they may face penalty and fines.

2. Input Tax Adjustment Problems

• Sometimes businesses face problem in claiming input tax credit if invoices are not recorded correctly.

3. High Sales Tax Rates & Compliance Issues

• Sometimes sales tax rates also become high, due to which businesses may face problems.

Conclusion

With the help of sales tax, our country’s economy is strengthened and with this the government funds public services.

If you are a business owner, you should register for sales tax as soon as possible so that your business is protected and you become a responsible taxpayer.

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