How Sales Tax Is Calculated in Pakistan: Formulas, Rates and Worked Examples

Pakistan's standard sales tax on goods is 18%. To add it, multiply the price by 0.18. To find the tax inside a price that already includes it, divide the price by 1.18 and subtract the result from the price. Services follow different rates, generally 15% or 16%, set by each province.

To skip the arithmetic, use our free Pakistan sales tax calculator. It adds or removes tax on goods and can include further tax. This guide explains the working behind it, so you can check any invoice yourself.

Goods and services are taxed under separate laws

Most confusion about sales tax in Pakistan comes from the fact that there are really two systems.

• Goods are taxed federally under the Sales Tax Act 1990, and the tax is collected by the Federal Board of Revenue (FBR).
• Services are taxed by the provinces, each under its own law and at its own rates. FBR collects the tax on services only in Islamabad.

So the first question for any invoice is whether you are supplying goods or a service. The next is who the buyer is, because that can add further tax.

Many people call sales tax "GST". The two terms are used interchangeably in everyday searches and conversation, but the federal law itself calls it sales tax.

How to add 18% sales tax to a price

When your price excludes tax, the formula is:

Sales tax = Price × 18%
Total     = Price × 1.18

Example: goods worth Rs 100,000.

• Sales tax: 100,000 × 0.18 = Rs 18,000
• Invoice total: 100,000 + 18,000 = Rs 118,000

How to remove sales tax from a tax-inclusive price

When a price already includes tax, divide by 1.18:

Price before tax = Total ÷ 1.18
Sales tax        = Total − Price before tax

Example: a total of Rs 236,000.

• Price before tax: 236,000 ÷ 1.18 = Rs 200,000
• Sales tax: 236,000 − 200,000 = Rs 36,000

Don't take 18% of the total. That gives Rs 42,480 of tax on this invoice, which overstates it by Rs 6,480. The 18% applies to the price before tax, not to the total. See our guide to removing sales tax from a price for more examples.

The same method works at any rate: divide the total by (1 + rate). For a service taxed at 16%, divide by 1.16.

Sales tax rates on services by province

Each authority charges its own general rate, and many sectors have different rates in the authority's schedule.

Where the service is taxed	Authority	Law	General rate
Punjab	Punjab Revenue Authority (PRA)	Punjab Sales Tax on Services Act 2012	16%
Sindh	Sindh Revenue Board (SRB)	Sindh Sales Tax on Services Act 2011	15%
Khyber Pakhtunkhwa	KP Revenue Authority (KPRA)	KP Sales Tax on Services Act 2022	15%
Balochistan	Balochistan Revenue Authority (BRA)	Balochistan Sales Tax on Services Act 2015	15% (confirm with BRA)
Islamabad	FBR	ICT (Tax on Services) Ordinance 2001	15%

Example: a Rs 100,000 consulting invoice comes to Rs 116,000 at Punjab's 16% and Rs 115,000 at Sindh's 15%.

These are general rates only. Telecom services, for example, are taxed at 19.5% in both Punjab and Sindh, and some services have reduced rates. Always check your service against the authority's own schedule.

A business serving clients in more than one province may also need to register with more than one authority. Our calculator covers goods only, so use the rates above for service invoices. For sector rates and which province applies, see our guide to sales tax on services.

Further tax on sales to unregistered buyers

If you sell taxable goods to a buyer who is not registered, or who is not an active taxpayer, section 3(1A) of the Sales Tax Act adds a further 4% of the value. It comes on top of the 18%.

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

On goods worth Rs 100,000, the buyer pays Rs 18,000 in sales tax and Rs 4,000 in further tax, a total of Rs 122,000. To work backwards from a total that includes both, divide by 1.22.

Exempt supplies are not taxable, so further tax does not arise on them. The federal government also excludes specified supplies by notification. These have included goods sold by retailers to end consumers and Third Schedule goods, so check the current notification, SRO 648(I)/2013. Our further tax guide covers who pays it and what's excluded.

Reduced rates, zero-rating, exemptions and retail price items

Not every sale of goods is taxed at 18%. Our guide to sales tax rates in Pakistan gives examples from each schedule.

Type of supply	Where to find it	Tax charged	Can the seller claim input tax?
Standard rate	Section 3	18%	Yes
Reduced rate	Eighth Schedule	Rate listed for the item	Depends on the entry and its conditions
Zero-rated, including exports	Section 4, Fifth Schedule	0%	Yes
Exempt	Section 13, Sixth Schedule	None	No
Retail price items	Third Schedule	18% of the printed retail price	Yes

Zero-rated and exempt supplies are not the same, even though neither adds tax to the invoice. A zero-rated seller can still recover the input tax on its purchases. An exempt seller can't, so that tax becomes a cost of the business.

Third Schedule goods are taxed on the manufacturer's or importer's retail price, not on the invoice price. The retail price excludes sales tax, so an item with a Rs 500 retail price carries Rs 90 of tax at 18%. The Finance Act 2026 added more items to this schedule, including household utensils and some ceramic products when sold in retail packing, so check whether your goods are now covered.

What you actually pay to FBR: output tax minus input tax

The tax on your invoice is not necessarily what you deposit. Registered businesses pay the difference between two figures:

• Output tax: sales tax you charge on your sales.
• Input tax: sales tax you paid on purchases made for your taxable business.

Sales tax payable = Output tax − Input tax

Two limits apply:

• Further tax can't be reduced by input tax. Section 7 excludes it from the output tax you can deduct against, so it's deposited in full.
• Input tax is capped. Section 8B generally limits the input tax you can adjust to 90% of the output tax for the period.

A complete worked example

A registered manufacturer sells goods worth Rs 250,000 to an unregistered trader. During the month it paid Rs 20,000 of input tax on raw materials. These are its only transactions that month.

The invoice

Item	Calculation	Amount (Rs)
Value of goods		250,000
Sales tax	250,000 × 18%	45,000
Further tax	250,000 × 4%	10,000
Invoice total		305,000

The monthly return

Item	Amount (Rs)
Output tax	45,000
Less input tax (within the 90% limit of Rs 40,500)	(20,000)
Net sales tax	25,000
Add further tax	10,000
Payable to FBR	35,000

Tax is paid by the 15th of the following month, and the return is filed by the 18th. See our guide to sales tax registration and monthly returns for the full steps.

Common mistakes

• Using 17%. This is the old rate. The Finance (Supplementary) Act 2023 raised it to 18%, but some websites still show 17%.
• Charging 18% on services. Services are taxed under provincial law, generally at 15% or 16%.
• Charging the wrong authority's rate. A firm in one province can have a tax obligation in another, depending on that province's rules.
• Taking 18% off an inclusive total. Divide by 1.18 instead.
• Forgetting further tax. Check whether your buyer is registered and active before you issue the invoice.
• Treating exempt sales like zero-rated sales. Claiming input tax against exempt supplies can lead to a tax demand.

Frequently asked questions

Is sales tax in Pakistan 17% or 18%? The standard rate on goods is 18% under section 3 of the Sales Tax Act 1990. The 17% you may still see online is the rate from before 2023.

Is sales tax on services 18%? No. The 18% rate applies to goods. Services are taxed by the provinces, or by FBR in Islamabad, generally at 15% or 16%, with different rates for some sectors.

What is the formula to remove 18% sales tax from a price? Divide the total by 1.18 to get the price before tax, then subtract that from the total to get the tax. Rs 1,180 splits into Rs 1,000 and Rs 180 of tax.

Is GST the same as sales tax in Pakistan? In everyday use, yes. People searching for a "GST calculator" in Pakistan usually mean the 18% sales tax on goods.

What is further tax? An extra 4% of the value, charged under section 3(1A) when taxable goods are sold to a buyer who is unregistered or not an active taxpayer.

When is sales tax due? Tax is paid by the 15th of the following month, and the monthly return is filed by the 18th.

Work it out, or have it handled

Use the Pakistan sales tax calculator to check an invoice on goods. It's free, needs no sign-up, and exports to Excel.

If you need sales tax registration, monthly returns or help with an FBR or provincial notice, our partners can handle it.

Sources: Sales Tax Act 1990 (FBR) · Punjab Sales Tax on Services Act 2012 (PRA) · Taxable services (SRB) · KP Sales Tax on Services Act 2022 (KPRA) · A Brief of Finance Act 2026 (KPMG)