Pakistan increases Sales Tax and Federal Excise tax rates

Amendments to the standard Sales Tax rate

The Pakistani Government initially increased the standard rate of Sales Tax from 17% to 18% effective 14 February 2023 for local supplies and imports, except for goods listed in the Third, Eighth and Ninth Schedules to the Sales Tax Act. As from 24 February 2023, the increased rate of 18% is generally applicable to all imports and supplies, except for any reduced rate or exemptions already provided.

Amendments to items in Eighth Schedule

The sales tax rate has been increased from 17% to 18% on the following items covered under the Eighth Schedule of the Sales Tax Act.

• Locally produced coal new rate PKR700 per metric ton or 18% ad valorem, whichever is higher

• Potassium Chlorate (KCLO3) - 18% plus PKR60 per KG

Amendments to items in Ninth Schedule

The Sales Tax rate has been increased on the following categories of cellular mobile phones/satellite phones. Sales tax shall be charged on the import value per set or equivalent value in rupees in the case of supply by the manufacturer.

• Exceeding US$200 but not exceeding US$350: 18%

• Exceeding US$350 but not exceeding US$500: 18%

• Exceeding US$500: 25%

Application of the 25% Sales Tax on imported goods

With effect from 8 March 2023, another increase of the Sales Tax rate to 25% applies to the import and subsequent supply of the following goods:

• Aerated water and juices

• Ice cream

• Shampoos

• Cigarettes, Cigars, and e-cigarettes

• Cosmetics and shaving items

• Tissue Paper

• Home appliances completely built unit

• Jams, jellies, preserved fruits and fruit and vegetable juices

• Mattresses and sleeping bags

• Confectionary

• Vehicles in completely built unit condition

• Sanitary and bathroom wares

• Carpets (excluding those from Afghanistan)

• Chandeliers and lighting devices or equipment

• Chocolates

• Cornflakes and other ready-to-use cereals

• Crockery, Kitchen ware and tableware and household articles

• Decorations or ornamental articles

• Dog and cat food

• Doors and window frames

• Fish

• Footwear

• Fruits and dry fruits (excluding those imported through a land route or barter mechanism)

• Furniture

• Leather jackets and apparel

• Fresh, chilled, frozen preserved or processed meat

• Musical instruments

• Pasta

• Arms and ammunition excluding defense stores

• Sunglasses

• Tomato Ketchup and sauces

• Travelling bags and suitcases

• Ships designed or adapted for use for recreation or pleasure or private use

• Aircraft designed or adapted for use for recreation or pleasure or private use

• Articles of jewelry (both precious metals and imitation)

• Wristwatches

Locally manufactured goods

The sales tax rate has also been increased to 25% with effect from 8 March 2023 on the supply of the following locally assembled/manufactured vehicles:

• Locally manufactured or assembled SUVs and CUVs

• Locally manufactured or assembled vehicles having engine capacity of 1400cc and above

• Locally manufactured or assembled double cabin (4x4) pick-up vehicles

Increase in Federal Excise Tax rates

Increased rates of Federal Excise Tax apply with effect from 14 February 2023 to the following goods:

• Aerated waters - 20% of retail price

• Aerated waters, containing added sugar or other sweetening matter or flavor - 20% of retail price

• Aerated waters if manufactured wholly from juices or pulp of vegetables, food grains or fruits and which do not contain any other ingredient, indigenous or imported, other than sugar, coloring materials, preservatives or additives in quantities prescribed under the West Pakistan Pure Food Rules, 1965 - 20% of retail price

• Sugary Fruit juices, syrups and squashes, waters, whether or not they contain added sugar or artificial sweeteners excluding mineral and aerated waters - 10% of retail price

• Locally produced cigarettes if their on-pack printed retail price exceeds PKR9,000 per thousand cigarettes to PKR16,500 per thousand cigarettes

• Locally produced cigarettes if their on-pack printed retail price does not exceed PKR9,000 per thousand cigarettes to PKR5,050 per thousand cigarettes

• Portland cement, aluminous cement, slag cement, super sulphate cement and similar hydraulic cements, whether or not they are colored or in the form of clinkers - PKR2.0 per kilogram

The Federal Excise Duty rate has also been increased on the following air travel services provided or rendered in respect of travel by air of passengers embarking on an international journey from Pakistan with club, business and first-class air tickets:

• International Air Transport Association (IATA) Traffic Conference Area 1 (North, Central, South America and Environs) – PKR250,000

• IATA Traffic Conference Area 2

  • (l) Middle East and Africa – PKR75,000

  • (II) Europe – PKR150,000

• IATA Traffic Conference Area 3 (Far East, Australia. New Zealand and Pacific islands) – PKR150,000

For additional information with respect to this Alert, please contact the following:

EY Ford Rhodes, Karachi

• Aamir Younas

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.