Budget 2026-27 — Sales Tax and Customs Changes at a Glance
Indirect tax, summarised
Sales tax and customs decide the landed cost of almost everything a business buys and sells. The Finance Act 2026 (Federal Budget 2026-27) cuts duties across thousands of tariff lines while expanding the sales tax base. Here is the consolidated picture.
Sales tax rates
| Category | Rate |
|---|---|
| Goods (FBR, Sales Tax Act 1990) | 18% |
| Services — Punjab (PRA) | 16% |
| Services — Sindh / KP / Balochistan | 15% |
| Services — Islamabad (ICT) | 16% |
| Telecom services | 19.5% |
Remember the split: goods sales tax is federal, while services sales tax is provincial — so a business operating across provinces deals with multiple authorities.
Key sales tax changes
- The Third Schedule is expanded, taxing more retail/consumer-price items at the manufacturing stage.
- Magazines are exempted and the tampon tax is abolished, while the family-planning devices exemption is withdrawn.
- The EV CKD exemption is extended to 30 June 2027, and refinery-upgrade capital goods are exempt.
- A 3% value addition charge is recoverable from manufacturers if imported raw material is sold in the same state; toll manufacturers withhold sales tax from unregistered buyers.
Customs at a glance
Under the National Tariff Policy 2025-30, duties are cut broadly:
| Duty | Direction |
|---|---|
| Customs Duty on inputs | Cut across 92 tariff lines (e.g. 5%→0%) |
| Additional Customs Duty | 6%→4%, 4%→2%, 2%→0% across thousands of lines |
| Regulatory Duty | Capped at 20%; reduced or eliminated on many lines |
Cancer-related APIs and agricultural machinery are exempt, construction vehicles drop from 20% to 10%, and defence imports are exempt.
Federal excise highlights
- Reduced: foreign travel FED, acetate tow, and FED removed on WHO-compliant sports/electrolyte beverages.
- Imposed: higher e-liquid FED, FED on naphtha/solvent/turpentine, and a new table for luxury EVs and luxury imported vehicles.
- Faceless audit, e-invoicing and production monitoring tighten enforcement.
How Zaffre keeps indirect tax compliant
With federal and provincial rates, an expanded Third Schedule and shifting tariffs, manual reconciliation is risky. Zaffre Axon, from Zaffre Tech, applies the correct 18% goods rate, provincial service rates and value-addition logic across invoices, while the finance module tracks customs and excise inputs. Zaffre HRM keeps payroll compliant alongside. Zaffretech and Zaffreaxon clients update rates centrally and stay aligned with FBR and provincial authorities.
References: Finance Act 2026 (Federal Budget 2026-27); Sales Tax Act 1990; National Tariff Policy 2025-30; FBR; provincial revenue authorities.
Book a demo of Zaffre Axon to keep sales tax and customs compliance under one roof.