Sales Tax on Services in Pakistan: Rates by Province and Which Authority Applies

Sales tax on services in Pakistan is not the federal 18%. Each province taxes services under its own law: the general rate is 16% in Punjab and 15% in Sindh, Khyber Pakhtunkhwa and Islamabad. Many sectors have different rates, and IT services are often much lower.

The 18% applies to goods. If you're invoicing for goods, use our Pakistan sales tax calculator or see our guide on how sales tax is calculated in Pakistan.

General sales tax rates on services, 2026-27

Where	Authority	Law	General rate	Telecom
Punjab	Punjab Revenue Authority (PRA)	Punjab Sales Tax on Services Act 2012	16%	19.5%
Sindh	Sindh Revenue Board (SRB)	Sindh Sales Tax on Services Act 2011	15%	19.5%
Khyber Pakhtunkhwa	KP Revenue Authority (KPRA)	KP Sales Tax on Services Act 2022	15%	19.5%
Balochistan	Balochistan Revenue Authority (BRA)	Balochistan Sales Tax on Services Act 2015	15% (confirm with BRA)	Check BRA schedule
Islamabad	FBR	ICT (Tax on Services) Ordinance 2001	15%	Check FBR schedule

The general rate is only the starting point. Before you invoice, look for your service in the authority's schedule, because a specific entry overrides the general rate.

Why provinces, not FBR, tax most services

The Constitution gives the provinces the right to tax services. FBR's role is limited to Islamabad, where it collects the tax under a separate law. So a business can deal with FBR for its goods and with PRA or SRB for its services, with separate registrations and separate returns.

How to calculate sales tax on a service

The arithmetic is the same as for goods, using the rate for your service.

Sales tax = Value of service × Rate
Total     = Value of service × (1 + Rate)

Example: a Rs 200,000 service taxed at the general rate.

	Punjab (16%)	Sindh (15%)
Value of service	Rs 200,000	Rs 200,000
Sales tax	Rs 32,000	Rs 30,000
Invoice total	Rs 232,000	Rs 230,000

To take the tax out of a total that already includes it, divide by (1 + rate). Rs 232,000 ÷ 1.16 gives Rs 200,000 before tax in Punjab.

Which province's tax applies?

This is the question that causes the most trouble, because the rules differ by province and by service. Three points cover most situations.

1. Your office usually decides it. Punjab taxes services provided from an office or place of business in Punjab, and KP's Act takes a similar approach for registered persons. Both Acts treat a branch inside the province and a branch outside it as separate legal persons. So if you have offices in Lahore and Karachi, each one should look at its own province's rules.

2. The client's location can also matter. Both Acts also tax services provided by a non-resident to a resident of the province. Punjab's Act also defines providing a service broadly, including its reception or consumption "in whole or in part". A firm with no office in a province can therefore still have an obligation there.

3. Some services have fixed rules. The federal government and the provinces agreed common place of provision rules in 2023, which Punjab notified as its Place of Provision of Services Rules. They settle where the service is treated as provided for advertising, insurance, franchising and licensing, transport of goods and power transmission. For these services, follow the rules rather than the general principle.

Provinces still sometimes claim tax on the same transaction, and the business community has raised this repeatedly. If you serve clients in several provinces, have your position reviewed before a notice arrives. Each authority has its own registration and returns; our guide to sales tax registration and monthly returns walks through the FBR process for goods.

Sales tax on IT and software services

IT is one of the most common exceptions, and the reduced rates usually come with a condition: no input tax adjustment. You charge less, but can't recover the tax on your purchases.

Where	Rate on IT and software services	Input tax adjustment
Punjab	0% for software or IT-based system development persons, 5% for others	No
Khyber Pakhtunkhwa	5% for digital and IT-based services	No
Islamabad	5% for software or IT-based system development consultants; IT and IT-enabled services are otherwise listed at 15%	No at 5%; check the entry at 15%
Sindh, Balochistan	Check the authority's schedule

Example: a Lahore software house taxed at 5% as "others" bills Rs 100,000 and charges Rs 5,000 in tax. If it paid Rs 3,000 of sales tax on its own purchases, it still deposits the full Rs 5,000, and the Rs 3,000 becomes a cost.

Each entry has its own conditions, so check yours before you apply a lower rate.

Other rates that differ from the general rate

Provincial schedules run to dozens of entries, so don't assume the general rate applies.

• Punjab lists reduced rates in Part III of its Second Schedule, including 3%, 5% and 8% on specified services, and 15% on carriage of goods by rail or road in Part I.
• Punjab and KP both now tax services broadly. Since the Punjab Finance Act 2025, all services in Punjab are taxable unless the First Schedule makes them tax-free. KP's Act similarly treats any service as taxable unless its First Schedule lists it. A service you assumed was outside the tax may not be.
• Reduced rates often carry conditions, such as no input tax adjustment or being limited to non-corporate businesses.

Common mistakes

• Charging 18% on a service. That's the federal rate on goods.
• Using one rate for every province. A firm with offices in Lahore and Karachi can't simply apply one rate to all its invoices.
• Assuming your service isn't taxable. This is riskier now that Punjab and KP tax services unless they're specifically excluded.
• Claiming input tax on a reduced rate. Many reduced rates don't allow it.
• Registering only where your head office is. A branch or client base elsewhere can create a separate obligation.

Frequently asked questions

What is the sales tax rate on services in Punjab? The general rate is 16% under the Punjab Sales Tax on Services Act 2012. Telecom is 19.5%, and many specified services have reduced rates.

What is the SRB sales tax rate? SRB's general rate on services is 15%, and telecom is 19.5%.

Is sales tax on services 18% in Pakistan? No. The 18% is the federal rate on goods. Services are taxed by the provinces, and by FBR in Islamabad, generally at 15% or 16%.

Do I need to register with more than one province? You may need to, if you have offices or provide services in more than one province. Each authority has its own registration and returns.

Is there sales tax on software and IT services? Usually yes, but often at a reduced rate without input tax adjustment. Punjab, KP and Islamabad each have specific entries, as shown in the table above.

Get your position checked

If you work across provinces or aren't sure which entry covers your service, our partners can review your position and handle registration and returns. For goods, the free Pakistan sales tax calculator works out the tax for you.

Sources: Punjab Sales Tax on Services Act 2012 and Place of Provision Rules (PRA) · Taxable services (SRB) · KP Sales Tax on Services Act 2022 (KPRA) · ICT (Tax on Services) Ordinance 2001 (FBR) · Balochistan Revenue Authority