This tax guide provides an overview of the indirect tax system and rules to be aware of for doing business in Pakistan.

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Indirect tax snapshot

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What is the principal indirect tax?

The principal indirect tax in Pakistan is General Sales Tax (GST) charged on taxable goods under Sales Tax Act, 1990 (the Act). GST is a Value Added Tax (VAT) in which the value added component at each stage of business transaction is taxed. GST is collectable from a registered person at import and charged by a registered seller of taxable goods. Tax credit or input tax is allowed when the registered person keeps proper record of claim regarding tax invoice and bill of entry. The goods meant for export were zero-rated. The tax paid on raw materials and other goods purchased in the course of business are deducted automatically while determining the tax liability. The system is based on self-assessment/clearance procedure and payment of tax.

Sales tax on service has also been introduced in Pakistan from 2011. Such tax is being charged, levied and collected by provincial governments in different provinces under their respective provincial legislations. Rate of tax on services varies from 13% to 16% in different provincial jurisdictions.

Is there a registration limit for the tax?

No pecuniary limit/threshold for registration is here. Every manufacturer, importer, wholesaler, distributor or dealer and retailers making taxable supplies is required to obtain registrationA person required to be registered shall submit an application through the computerised system along with the following documents, namely:

  • CNIC of all owners, members, partners or directors, as the case may be, and the representative, if any, and in case of non-residents, their passports
  • in case of a company or registered AOP, the Registration or Incorporation Certificate, along with Form III or Form A as prescribed in the Companies Ordinance, 1984 (XLVII of 1984)
  • in case of a partnership, the partnership deed
  • bank account certificate issued by the bank in the name of the business
  • lease or rent agreement, if the premises are rented, along with CNIC of the owner of the premises
  • ownership documents of the premises, such as registered sale deed or registered transfer deed
  • latest utility bills (electricity, gas, land-line telephone, and post-paid mobile phones, as the case may be)
  • list of machinery installed, in case of manufacturer
  • distribution certificate from the principal showing distributorship or dealership, in case of distributor or dealer x balance sheet/statement of affairs/equity of the business
  • particulars of all branches in case of multiple branches at various locations
  • particulars of all franchise holders in case of national or international franchise.
  • GPS-tagged photographs of the business premises.
Does the same registration limit apply to non-established businesses?

Not applicable.

Is there any specific legislation to tax non-resident supplies of electronically supplied/digital services to private consumers resident in your country?

Not applicable.

Does a non-established business need to appoint a fiscal representative in order to register?

Not applicable.

How often do returns have to be submitted?

GST returns cover a tax period of one month, ending on the last day of a calendar month. A registered person is required to deposit tax by 15th and the return shall be submitted electronically by the 18th of the next month.

Are penalties imposed for the late submission of returns/ payment of tax?

In case of sales tax on goods, a penalty of PKR 10,000 is applicable for delay in submission of return. Default surcharge at the rate 12% is applicable for delay in payment of tax.

For sales tax on services, different rates of penalties and default surcharge are applicable for late submission of returns and payment of tax respectively in different provincial jurisdictions.

Are any other declarations required?

In addition to the monthly sales tax return, an annual sales tax return and quarterly reconciliation statements in some of the cases are also required to be submitted.

Are penalties imposed in other circumstances?

Yes. A range of penalties are applicable for default of other legal requirements as well.

Can the VAT incurred by overseas businesses be claimed if they are not registered in Pakistan?

Not applicable.

What information must a GST invoice show?

A GST invoice must show:

  • a unique serial number
  • seller’s and buyer’s name and address
  • seller’s and buyer’s registration number
  • date of issue of invoice
  • a description and quantity of the goods or services supplied to the customer
  • value exclusive of sales tax
  • amount of sales tax
  • value inclusive of sales tax.
Are there any current or anticipated Standard Audit File for Tax (SAF-T) or similar electronic/digital filing requirements eg invoice listing data file/real-time VAT reporting?

Yes, all the sales tax returns files are uploaded online in the tax authorities portal and no manual submission is effective currently. Tax Authorities review these online submitted returns and issue notices for compliances. In some of the cases notices are also uploaded in this portal for necessary compliances.

Contact us

For further information on indirect tax in Pakistan please contact:

Ahsan Laliwalai
T +92 (0)21 35672952-55 Ext 103
E ntirmizi@gtpak.com

Kazi Zeeshan Akbar
T +92 (0)21 35672952-55 Ext 116
E zakbar@gtpak.com

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