Further Tax in Pakistan: The 4% on Sales to Unregistered Buyers

Further tax is an extra 4% of the value, charged when a registered business sells taxable goods to a buyer who is unregistered or not an active taxpayer. It comes on top of the 18% sales tax, so on Rs 100,000 of goods the buyer pays Rs 122,000. The seller collects it and deposits it with FBR in full, and certain supplies are excluded.

Our free Pakistan sales tax calculator adds it for you: tick Buyer is unregistered or not an active taxpayer.

What the law says

Further tax comes from section 3(1A) of the Sales Tax Act 1990. It applies where taxable supplies are made to a person who:

• hasn't obtained a sales tax registration number, or
• isn't an active taxpayer.

The second point catches people out. A buyer with a valid registration number can still trigger further tax if they aren't active.

The rate has been 4% since 1 July 2023, when it rose from 3%. Some websites still show 3%. Reports in 2025 said the government planned to abolish further tax, but the Act as amended up to June 2025 still shows 4%, and KPMG's brief on the Finance Act 2026 reports no change.

When is a registered buyer not "active"?

Under section 2(1A) of the Act, a registered person isn't an active taxpayer if they:

• are blacklisted, or their registration is suspended, under section 21
• fail to file their sales tax return by the due date for two consecutive tax periods
• fail to file their income tax return or statement by the due date
• fail to file a required quarterly or annual withholding tax statement

A buyer's status can change during the year, so check it regularly rather than only when you first take them on. You can check it on FBR's Active Taxpayer List for sales tax.

How to calculate further tax

Further tax is worked out on the value of the supply, not on the value plus sales tax.

Sales tax   = Value × 18%
Further tax = Value × 4%
Total       = Value × 1.22

Example: goods worth Rs 500,000.

	Active registered buyer	Unregistered or inactive buyer
Value of goods	Rs 500,000	Rs 500,000
Sales tax at 18%	Rs 90,000	Rs 90,000
Further tax at 4%	None	Rs 20,000
Invoice total	Rs 590,000	Rs 610,000

For a total that already includes both taxes, divide by 1.22. See our guide to removing sales tax from a price for more examples.

How the seller deposits it

Further tax is effectively passed straight through to FBR. Section 7 excludes it from the output tax you can deduct input tax against, so you can't reduce it with your purchases.

Example: continuing with the Rs 500,000 sale to an unregistered buyer, where the seller paid Rs 50,000 of input tax that month.

Item	Amount (Rs)
Output tax	90,000
Less input tax	(50,000)
Net sales tax	40,000
Add further tax	20,000
Payable to FBR	60,000

Getting the buyer's status wrong can be costly. As the seller, you're the person liable for the tax on your supply, so if you should have charged further tax and didn't, it can come out of your own margin.

What's excluded from further tax

Exempt supplies aren't taxable, so further tax doesn't arise on them. The federal government can also exclude specified supplies by notification. The main one is SRO 648(I)/2013, as amended, which has listed:

• Goods sold by retailers to end consumers, and goods supplied directly to end consumers, including food and beverages, fertilisers and vehicles
• Third Schedule goods
• Fifth Schedule goods
• Fertilisers, and second-hand worn clothing
• Electricity supplied to domestic and agricultural consumers, and natural gas supplied to domestic consumers and CNG stations
• Petrol, diesel, jet fuel, kerosene and fuel oil
• Supplies to government, semi-government and statutory regulatory bodies
• Foam or spring mattresses and other foam products for household use
• White crystalline sugar
• Supplies by the steel sector, including melters, re-rollers and ship breakers under the special procedure rules, and by the edible oil sector

The notification has been amended several times, so check the current version before you rely on an exclusion.

The most common point of confusion is the first one. A shop selling to the public doesn't generally add further tax to each sale, but a distributor selling to an unregistered shopkeeper generally does, because the shopkeeper isn't the end consumer.

Further tax isn't the same as withholding

Sales tax withholding also penalises dealings with persons who aren't active taxpayers, and it's easily confused with further tax.

	Further tax	Sales tax withholding
Who's unregistered?	The buyer	The supplier
Who collects it?	The seller	The buyer
Rate	4% of the value	For companies, 5% of the gross value of supplies from persons other than active taxpayers
Where it's set	Section 3(1A)	Eleventh Schedule

The Finance Act 2026 widened this withholding. Individuals and associations of persons are now also withholding agents when buying from persons who aren't active taxpayers, and toll manufacturers must withhold from unregistered persons. Check whether the rules cover your business.

Why unregistered buyers often lose out

On the Rs 500,000 example above, compare the real cost to the buyer.

• An active registered buyer pays Rs 590,000 but can generally claim the Rs 90,000 as input tax, so the real cost is Rs 500,000.
• An unregistered buyer pays Rs 610,000 and can claim nothing, so the real cost is Rs 610,000.

That Rs 110,000 difference is often the strongest argument for a growing business to register for sales tax. Registration also brings filing duties, so weigh the two together.

Common mistakes

• Using the old 3% rate. The rate has been 4% since July 2023.
• Only checking for a registration number. Check that the buyer is active too.
• Calculating 4% on the tax-inclusive amount. It's 4% of the value before tax.
• Offsetting further tax with input tax. Section 7 doesn't allow it.
• Charging it on excluded supplies. Check SRO 648(I)/2013 first.

Frequently asked questions

What is the further tax rate in Pakistan? 4% of the value of the supply, in addition to sales tax, under section 3(1A) of the Sales Tax Act 1990.

Who pays further tax? The buyer bears the cost, and the seller charges it on the invoice and deposits it with FBR.

Can further tax be claimed as input tax? The seller can't reduce further tax with input tax. An unregistered buyer can't claim input tax at all.

Does further tax apply to sales to end consumers? Generally no. SRO 648(I)/2013 has excluded goods sold by retailers to end consumers, and goods supplied directly to end consumers. Check the current notification.

Does further tax apply to services? Section 3(1A) is part of the federal Act, which covers goods. Services fall under provincial law, so check the relevant province's rules.

Was further tax abolished? Abolition was reported as a plan in 2025, but we've seen no change to section 3(1A) reported in the Finance Act 2026. It still applies as far as we can confirm, so check the latest FBR text.

Work it out or have it handled

Use the free Pakistan sales tax calculator to see an invoice with and without further tax. For more on the basics, see how sales tax is calculated in Pakistan. If you're unsure how it affects your customers or suppliers, our partners can review your position.

Sources: Sales Tax Act 1990, sections 2(1A), 3(1A) and 7 and the Eleventh Schedule (FBR) · A Brief of Finance Act 2026 (KPMG) · Section 3 presentation, including SRO 648(I)/2013 (Karachi Tax Bar) · Further tax raised to 4% (ProPakistani)