The Standard 18% Sales Tax on Goods Explained
The headline rate for goods
In Pakistan, the standard rate of sales tax on goods is 18%. Goods are a federal levy administered by the FBR under the Sales Tax Act 1990, and this 18% standard rate continues to apply in the Finance Act 2026 (Federal Budget 2026-27). It is the default rate that applies to most taxable supplies of goods unless a specific exemption, reduced rate or special scheme applies.
How the 18% is charged
Sales tax is charged on the value of the taxable supply. A registered supplier adds 18% to the sale value, collects it from the buyer, and accounts for it to the FBR.
Simple worked example
- Sale value of goods: Rs 100,000
- Sales tax at 18%: Rs 18,000
- Total invoice to buyer: Rs 118,000
The Rs 18,000 is output tax that the supplier must account for to the tax authority.
Input tax adjustment
A core feature of sales tax is that registered businesses can generally offset the sales tax they pay on their purchases (input tax) against the sales tax they collect on their sales (output tax). The net amount is what is paid to the FBR.
| Item | Amount (Rs) |
|---|---|
| Output tax collected on sales | 18,000 |
| Less: input tax paid on purchases | (10,000) |
| Net sales tax payable | 8,000 |
This mechanism means sales tax is ultimately borne by the final consumer, while registered businesses act as collection points along the chain.
Important variations to remember
- Exemptions: some goods are exempt — for example, magazines are exempted in Budget 2026-27.
- Third Schedule items: for listed goods, sales tax is charged on the retail/consumer price at the manufacturing stage; the Third Schedule was expanded in 2026-27.
- Services differ: services are taxed by the provinces at their own rates, separate from the federal 18% on goods.
What businesses must get right
- Register for sales tax where required and issue compliant tax invoices.
- Charge 18% correctly on taxable supplies of goods.
- Claim valid input tax and maintain supporting records.
- File accurate returns and pay the net liability on time.
Getting 18% right every time with Zaffre Axon
Applying the correct rate, tracking input versus output tax and producing compliant invoices is a constant operational task. Zaffre Axon, from Zaffre Tech, auto-applies the standard 18% sales tax on goods across invoices and finance, alongside FBR slabs, EOBI and withholding, from one central configuration. Zaffreaxon calculates the tax, captures input adjustments and keeps the records return-ready, while Zaffre HRM keeps payroll compliant in the same system.
With Zaffretech handling the sales tax arithmetic, every invoice is accurate and every return is built on clean data.
References: Sales Tax Act 1990; Finance Act 2026 (Federal Budget 2026-27); FBR sales tax provisions.
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