How sales tax is worked out on an invoice in Pakistan

Answer first. For most goods, the sales tax on an invoice is 18% of the value before tax. Rs 100,000 of goods carries Rs 18,000 of tax, so the invoice total is Rs 118,000. Three things change that sum. A buyer who isn't registered, or isn't an active taxpayer, adds 4% further tax. Goods in the Third Schedule are taxed at 18% of the printed retail price, not your price. And some goods have their own rate: reduced, zero-rated or exempt. Services are taxed by the provinces, at standard rates of 16% in Punjab and 15% in Sindh, Khyber Pakhtunkhwa and Balochistan.

The basic sum: 18% of the value

The standard rate of sales tax on goods is 18%, under section 3(1) of the Sales Tax Act. It has been 18% since 2023, and the Finance Act 2026 left it there. Work it out line by line:

The sum is the same every time: tax = value × 18%, and total = value + tax.

Working back from a total. If you only know the price with tax, divide by 1.18 to get the value. A total of Rs 11,800 is a value of Rs 10,000 plus Rs 1,800 of tax.

What counts as the value

The value is what your buyer pays you for the goods, without the sales tax. Other duties and taxes in the price stay in the value.

Discounts. A trade discount lowers the value, and so the tax, if two things are true. The invoice shows the discounted price and the tax on it. And the discount is normal in your trade. A Rs 1,000 item sold with a Rs 100 discount has a value of Rs 900 and tax of Rs 162. A discount given later, after the invoice, needs a credit note instead.

Below-market prices. When goods are paid for in kind, or sold below market price to a related business, the value is the open market price, not the price on the invoice.

Unregistered buyers: 4% further tax

When your buyer has no sales tax registration number, or is registered but not an active taxpayer, add further tax of 4% of the value. It comes on top of the 18%, under section 3(1A) of the Sales Tax Act.

An active taxpayer is one on FBR's Active Taxpayer List. A registered business drops off it if it is suspended or blacklisted, or misses two sales tax returns in a row, among other reasons. So a buyer who was registered last year may need further tax today. That is why the buyer check matters on every invoice, not just the first. See how to check an STRN or verify an NTN.

Further tax doesn't apply to every sale. FBR's notification on further tax leaves it off sales by retailers to end consumers, Third Schedule goods, zero-rated supplies, supplies to government bodies and a few named sectors.

Retail-price goods: tax on the printed price

Goods in the Third Schedule are taxed at 18% of their printed retail price, not the price on your invoice. The list covers everyday packed goods, such as juices, soft drinks, toilet soap, shampoo and toothpaste. The Finance Act 2026 added more from 1 July 2026, including footwear, packed milk, pasta, sauces, utensils, crockery, sanitaryware and plastic household goods.

The retail price is the price the manufacturer or importer fixes for sale to the public, including all duties and charges but not sales tax. The pack has to show the retail price and the sales tax on it.

Here is how it works when a shampoo maker sells to a distributor:

Tax on the selling price would have been Rs 720. The law asks for Rs 900, worked out from the retail price. Third Schedule goods carry no further tax either, even when the buyer is unregistered.

Reduced, zero-rated and exempt goods

Some goods have their own treatment, set by a schedule of the Sales Tax Act. The difference that matters most is input tax: you can claim it on zero-rated sales, but not on exempt ones.

On an FBR e-invoice, each of these has its own sale type, and reduced-rate and exempt lines also quote the schedule and serial number that allows them. Our guide to mapping tax codes to FBR sale types shows how.

When the buyer withholds part of the tax

Some buyers keep back part of your sales tax and pay it to FBR themselves. You still charge the full tax on the invoice. You just receive less of it.

• Withholding agents buying from an active taxpayer, such as government departments, keep back one fifth of the sales tax. On a value of Rs 1,000 with Rs 180 of tax, they keep Rs 36 and pay you Rs 1,144.
• Buying from someone who isn't an active taxpayer? Companies withhold 5% of the gross value. Since 1 July 2026, associations of persons and individuals do the same.

Withholding doesn't apply between two registered businesses when the seller is an active taxpayer, except in a few named cases.

Services: the provincial rates

Sales tax on services is collected by the provinces, and by FBR for Islamabad. Each sets its own standard rate:

Many services have their own rate in each province's schedule. Restaurants are the best-known case, because the rate depends on how the guest pays:

Balochistan's 4% isn't open to restaurants inside hotels or clubs, or to franchises. No input tax can be claimed at these reduced restaurant rates. More in our restaurants and hotels page.

How FBR checks your sums

On an FBR e-invoice, every line carries its value, sale type, rate and tax. FBR's system works the tax out again and compares. If your figure doesn't match the rate, the line is rejected with an error such as 0104, "Calculated percentage of sales tax not matched". Retail-price goods have their own check, error 0102, for tax not worked out from the retail price. A rejected invoice gets no FBR number until it is fixed and sent again.

eInvoicePro, our digital invoicing software for FBR, works the tax out for you on every line: the standard rate, retail-price items, exempt items and further tax. It takes the rate from the product and the buyer's status from FBR, so the sums match before the invoice goes.

See the FBR error codes guide for the full list of rejections and their fixes.

FAQs

How do you calculate sales tax on an invoice in Pakistan? Multiply the value before tax by 18%. Add 4% further tax if the buyer has no sales tax registration or isn't an active taxpayer. For Third Schedule goods, take 18% of the printed retail price instead of your selling price.

What is the sales tax rate in Pakistan in 2026? 18% on goods, unchanged by the Finance Act 2026. Services are taxed by the provinces: 16% in Punjab, and 15% in Sindh, Khyber Pakhtunkhwa and Balochistan. Some goods and services have their own reduced rates.

How do I work out the tax from a price that includes tax? Divide the price by 1.18 to get the value, then take the value away from the price to get the tax. Rs 11,800 is a value of Rs 10,000 and Rs 1,800 of tax.

What is further tax? An extra 4% of the value, charged when you sell to someone without a sales tax registration number, or who is registered but not an active taxpayer. It doesn't apply to retailers' sales to end consumers or to Third Schedule goods.

Is sales tax charged before or after a discount? After, if the invoice shows the discounted price and the tax on it, and the discount is normal in your trade. A discount given after the invoice needs a credit note.

What is the SRB sales tax rate on services? 15% is SRB's standard rate. Restaurants pay 8% when the guest pays by card, mobile wallet or QR, and 15% otherwise. Beauty and well-being services are 8%.

What is the PRA sales tax rate? 16% is PRA's standard rate in Punjab. Restaurants and hotels pay 8% when the guest pays by card, mobile wallet or QR, and 16% otherwise.

What is the KPRA sales tax rate? 15% is the standard rate in Khyber Pakhtunkhwa. Restaurants and hotels pay 6% on card, wallet, QR or online payments. Non-corporate restaurants pay 10% on cash.

Related reading: the sales tax invoice format, HS codes for FBR invoicing and the sales tax return and Annex-C.