Sales tax and invoicing in Pakistan (2026): rates, e-invoices

Sales tax in Pakistan has two layers. The Federal Board of Revenue (FBR) collects sales tax on goods and imports under the Sales Tax Act, 1990, and on services in the Islamabad Capital Territory. Services elsewhere are taxed by the provinces, each with its own revenue authority. This guide explains, for a small business, the rates, who must register, monthly returns, what a tax invoice must contain and the FBR’s digital invoicing rules in force in 2026. Figures are as of October 2026.

Sales tax at a glance

Within the federal tax on goods:

• Goods in the Third Schedule are taxed at 18% of the printed retail price, which the manufacturer or importer prints on each item.
• Eighth Schedule goods are taxed at reduced rates; input tax is generally not adjustable against supplies at a reduced rate.
• Fifth Schedule supplies and exports are zero-rated, so you can claim back the input tax.
• Sixth Schedule goods are exempt, as are goods covered by exemption notifications (SROs).
• Further tax of 4% applies on top of the standard rate to taxable supplies made to a person who is not registered or is not an active taxpayer, unless a notification excludes the supply.

Who must register

Under section 14 of the Sales Tax Act, you must register with the FBR if you make taxable supplies, including zero-rated ones, as:

• a manufacturer, unless you run a cottage industry (a manufacturing concern in a residential area with no industrial gas or electricity connection, no more than ten workers and annual turnover of no more than PKR 8 million)
• a retailer liable to sales tax, other than retailers who pay through their electricity bills
• an importer, an exporter who wants refunds, or a wholesaler, dealer or distributor
• since the Finance Act 2025, a seller of digitally ordered goods through an online marketplace, website or app; marketplaces and couriers may not serve sellers who are not registered

Tier-1 retailers, such as units of national or international chains, shops in air-conditioned malls and retailers whose electricity bills for the last 12 months exceeded PKR 1.2 million, have extra obligations, including integrating their points of sale with the FBR. The Finance Act 2026 added turnover tests of more than PKR 200 million to this definition. The Commissioner can register a business compulsorily if it should have registered but did not. Service providers register separately with their provincial revenue authority.

Returns and payment

• Tax period: monthly.
• Deadlines: for most registered persons, pay the tax by the 15th and file the return electronically by the 18th of the following month.
• Input tax: you deduct the sales tax paid on your purchases and imports. Excess input tax is carried forward to the next month; refunds are available for zero-rated supplies and exports, within 45 days of the claim.
• Default surcharge: on tax paid late, 12% a year or KIBOR plus 3% a year, whichever is higher; in cases of tax fraud, 2% a month. Penalties for late or incorrect returns come on top.

Provincial service tax is declared and paid separately to the relevant provincial authority, under that authority’s own rules and deadlines.

Tax invoices under section 23

A registered person must issue a serially numbered tax invoice at the time of supply, in Urdu or English, showing:

1. 1the supplier’s name, address and registration number
2. 2the recipient’s name, address and registration number (for supplies by manufacturers or importers to unregistered distributors, the distributor’s national identity card number or NTN)
3. 3the date of issue
4. 4the description and quantity of the goods
5. 5the value excluding tax
6. 6the amount of sales tax
7. 7the value including tax

Rules to know:

• Only one tax invoice may be issued for a taxable supply, and only registered persons may issue one.
• For goods that are transported, the tax invoice must be linked to the e-Bilty (electronic transport document).
• From the Finance Act 2026, a tax invoice, including an advance receipt invoice, is required for exempt as well as taxable supplies and must carry a verifiable and unique FBR invoice number, from the date the FBR notifies.
• Debit and credit notes (section 9) adjust output tax when a supply is cancelled, goods are returned, or the nature or value of the supply changes. Since 2026 they follow the FBR’s prescribed mechanism, including electronic adjustments, and integrated businesses issue them electronically through the integrated system.
• Records must be kept for six years after the end of the tax period concerned, or longer while proceedings are open.

FBR digital invoicing and POS integration

Chapter XIV of the Sales Tax Rules, 2006 (rewritten by SRO 69(I)/2025) and section 23 of the Act require registered persons named by the FBR to integrate their invoicing hardware and software with the FBR’s computerised system, through a licensed integrator or PRAL. Each invoice is transmitted in real time and receives a unique FBR invoice number and a QR code, which are printed on it with the FBR digital invoicing logo. The data fills Annex-C of your sales tax return automatically, exempt supplies must also go through the system, and debit and credit notes are issued electronically. The cost of integration is yours.

An electronic invoice also shows, among other things, the tax period, the HS code, the unit of measurement, the sales tax rate, any tax withheld, further tax and extra tax, and the SRO and serial number that applies.

Deadlines under SRO 1852(I)/2025 (24 September 2025):

Turnover is the turnover declared in sales tax returns for the last twelve months. Separately, Tier-1 retailers must integrate their retail outlets for real-time reporting, and restaurants, cafés and hotels must use FBR-approved fiscal devices and software that print the QR code and FBR invoice number on every bill.

Calculation example in rupees

A registered manufacturer has this month:

Output tax PKR 202,000 minus input tax PKR 108,000 = PKR 94,000, payable by the 15th of the next month, with the return by the 18th (input tax adjustment is subject to the limits in section 8B of the Act).

If the business also provides taxable services in Sindh worth PKR 200,000, it charges Sindh sales tax of 15% (PKR 30,000) and declares it to the Sindh Revenue Board, not the FBR. To find the tax inside a price at 18%: PKR 118,000 × 18 ÷ 118 = PKR 18,000.

Common mistakes

1. 1Forgetting the 4% further tax on supplies to unregistered or inactive buyers.
2. 2Issuing invoices outside the integrated system after your e-invoicing date.
3. 3Declaring services to the FBR when they belong to a provincial authority, or the other way round.
4. 4Missing the 15th payment deadline because the return is due on the 18th.
5. 5Issuing a second tax invoice for the same supply instead of a debit or credit note.
6. 6Keeping records for less than six years.

How Clientlly helps

Clientlly numbers invoices sequentially per series and puts your country’s sales tax rates on every invoice, with credit notes linked to the original invoice. You can invoice in multiple currencies, add a card payment link, see when a client opened the invoice and let automatic reminders go out 3, 14 and 30 days after the due date. Scanned purchase receipts have the tax read automatically, sales and purchase tax books are kept per rate, including exports, and tax reports with Excel and PDF exports are ready for you and your accountant. Low-stock notifications and reorder rules help manufacturers and traders. See accounting and the reorder point formula.

Clientlly is not a licensed integrator and is not connected to the FBR’s digital invoicing system. Because sales tax registered persons must now issue invoices through an FBR-integrated system, you need a licensed integrator or PRAL for that part.