Introduction
If you’re running a business in Pakistan, understanding sales tax is crucial. It’s an indirect tax applied to the sale of goods and services, and it plays a big role in the country’s tax system. Governed by the Sales Tax Act, 1990 and managed by the Federal Board of Revenue (FBR), sales tax compliance is essential to keep your business running smoothly. In this guide, we’ll walk you through how to register for sales tax and explain who governs it at the federal and provincial levels.
What is Sales Tax?
Simply put, sales tax is a value-added tax (VAT) charged at different stages of production and distribution. In Pakistan, the standard sales tax rate is 18
%, though it can vary depending on the industry and type of goods or services.
How to Register for Sales Tax in Pakistan
If your business falls within the required criteria, you’ll need to register for sales tax with the FBR. Here’s a step-by-step guide:
1. Check If You Need to Register
You must register for sales tax if:
- Your business turnover exceeds PKR 7.5 million (for manufacturers) or PKR 10 million (for retailers).
- You sell taxable goods or services under the Sales Tax Act, 1990.
- You import or export goods.
2. Sign Up on IRIS
- Head to the FBR’s IRIS portal (iris.fbr.gov.pk).
- Sign up using your Computerized National Identity Card (CNIC) and National Tax Number (NTN).
3. Submit Your Application
- Log into IRIS and go to the ‘Sales Tax Registration’ section.
- Provide details like:
- Business name and address
- Business type (manufacturer, retailer, importer, etc.)
- Bank account information
- Ownership proof or rental agreement for business premises
- CNIC copies of business owners or partners
4. Verification Process
- The FBR may conduct a verification, including a physical inspection of your business location.
- Once approved, you’ll receive your Sales Tax Registration Number (STRN).
5. Issue Sales Tax Invoices
- After registration, you must issue sales tax invoices and keep proper sales and purchase records.
6. File Monthly Sales Tax Returns
- Every month, submit your sales tax return through IRIS.
- Pay your sales tax by the 15th of each month, and submit the return by the 18th.
Who Governs Sales Tax in Pakistan?
Sales tax collection is split between the Federal Board of Revenue (FBR) and provincial revenue authorities.
Federal Jurisdiction (FBR)
- The FBR handles sales tax on goods nationwide.
- It regulates manufacturers, importers, wholesalers, and retailers.
- It also oversees refunds and input tax adjustments.
Provincial Jurisdictions
Each province has its own authority that collects sales tax on services:
- Punjab Revenue Authority (PRA) – Handles tax collection in Punjab.
- Sindh Revenue Board (SRB) – Oversees tax in Sindh.
- Khyber Pakhtunkhwa Revenue Authority (KPRA) – Covers KPK.
- Balochistan Revenue Authority (BRA) – Manages tax in Balochistan.
Each provincial authority has its own tax regulations and compliance requirements.
What Happens If You Don’t Register?
Failing to register or file your tax returns can lead to:
- Heavy fines for late or missed filings.
- Business suspension or registration cancellation.
- Legal action, including the possibility of your business premises being sealed by tax authorities.
Final Thoughts
Registering for sales tax might seem overwhelming, but it’s a necessary step to keep your business compliant and avoid penalties. Whether your business falls under FBR or a provincial authority, understanding sales tax laws can help you operate smoothly.
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