VATupdate
VAT

VAT Rates in Pakistan

Quick overview

Standard Rate Reduced Rate Other Rates
17% 1%, 1.5%, 2%, 3%, 5%, 6%, 7%, 8%, 10%, 12%, 13%, 15%, 16% 16% FED on goods in sales tax mode

The local name for VAT in Oman is Sales Tax.

There are basically 11 VAT rates in Pakistan:

  • Standard VAT rate is 17%
  • Reduced VAT rate is 1%, 1.5%, 2%, 3%, 5%, 6%, 7%, 8%, 10%, 12%, 13%, 15%, 16%
  • And a special rate of 16% FED on goods in sales tax mode

Recent developments

For more information about (recent) rate change developments in Pakistan, please click here.

Standard rate: 17%

17% for goods and for telecommunication services under the federal law.

The standard tax rate of 17% is imposed on the value of the supply of goods or at the import stage. However, in certain cases, the value of the supply of certain goods is based on the manufacturer/importer’s maximum retail price (not the transaction value/trade price). Exported goods are zero-rated (that is, taxed at 0%). For businesses operating in certain export-oriented sectors, the reduced rate applies to goods they import and to local supplies of goods provided to them.

Examples of goods taxed based on the manufacturer’s retail price
• Fruit juices and vegetable juices
• Ice cream
• Aerated water or beverages and drink syrups
• Cigarettes

• Toilet soap, detergents, shampoo, toothpaste and shaving cream
• Perfumery and cosmetics
• Powder drinks and milky drinks
• Tea
• Toilet paper and tissue paper
• Spices sold in retail packaging bearing brand names and trademarks
• Shoe polish and shoe cream
• Fertilizers
• Cement sold in retail packaging
• Mineral/bottled water
• Household electrical goods, including air conditioners, refrigerators, deep freezers, televisions, recorders and players, electric bulbs, tube lights, electric fans, electric irons, washing machines and telephone sets
• Household gas appliances, including cooking range, ovens, geysers and gas heaters
• Foam or spring mattresses and other foam products for household use
• Paints, distempers, enamels, pigments, colors, varnishes, gums, resins, dyes, glazes, thinners, blacks, cellulose lacquers and polishes sold in retail packing
• Lubricating oils, brake fluids, transmission fluid, and other vehicular fluids sold in retail packing
• Storage batteries excluding those sold to automotive manufacturers or assemblers
• Tires and tubes, excluding those sold to automotive manufacturers or assemblers
• Motorcycles
• Auto rickshaws
• Biscuits in retail packing with brand name
• Tiles
• Auto parts in retail packing, excluding those sold to automotive manufacturers or assemblers

Zero rate (0%)

Exported goods are zero-rated (that is, taxed at 0%). For businesses operating in certain export-oriented sectors, the reduced rate applies to goods they import and to local supplies of goods provided to them.

Examples of exempt supplies of goods
• Agricultural products, including eggs, meat of bovine animals, sheep and goat, and fresh vegetables (except ware potato and onions)
• Pharmaceuticals
• Newspapers and books
• Educational and scientific materials
• Equipment for fighting AIDS and cancer
• Supplies (excluding electricity and natural gas) made to hospitals run by the federal or provincial government or charitable operating hospitals of 50 beds or more, or to teaching hospitals of statutory universities of 200 or more beds

Examples of zero-rated supplies of goods
• Exports
• Supplies to diplomats, diplomatic missions, privileged persons and privileged organizations
• Supplies of stores and provisions for consumption aboard a conveyance proceeding to a destination outside Pakistan
• Certain stationery goods such as erasers and exercise books, subject to certain conditions and limits

Reduced rates: 0-16%

Reduced Goods 0-12% and Services 0-10%

For services, 16% for Islamabad and Punjab, 15% for KPK and Balochistan and 13% for Sindh

A further tax at the rate of 3% (with certain exceptions) is chargeable on the supply of goods to persons who have not obtained sales tax registration.

The sales tax rates for services are:
• Standard rates for services: 13%, 15%, 16%
• Reduced rates: 0%, 2%, 3%, 5%, 8%, 10%, 15%
• Other rates: 17% and 19.5%
Most services are taxed at 16% in Punjab and Islamabad, 13% in Sindh and 15% in Khyber Pakhtunkhwa and Balochistan. However, telecommunication services are taxed at 17% in Islamabad and 19.5% in the remaining provinces.

Examples of goods taxable at the reduced rates (1%-16%)
• Plant and machinery not manufactured locally and having no comparable local substitutes
• Gold in unworked condition
• Re-importation of foreign-origin goods that were temporarily exported out of Pakistan

A global VAT/GST rate overview can be found here (note this is a work in progress).

This post was last updated on June 9, 2021.

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